Thu, 30 Nov 2000

Government makes deal with Prajogo to restructure Chandra Asri

JAKARTA (JP): The government reached agreement with businessman Prajogo Pangestu late Wednesday on tough debt restructuring terms for the petrochemical giant PT Chandra Asri Petrochemical Center.

But Chairman of the Indonesian Bank Restructuring Agency (IBRA) Edwin Gerungan declined to disclose details because the government had yet to renegotiate the interest rate with Chandra Asri's main foreign creditor Marubeni Corp.

"We have reached a deal with Prajogo, but because it's a complex issue and because we still have to talk to the Japanese creditor we can't disclose details right now," Edwin told reporters following a meeting with the Financial Sector Policy Committee (FSPC) and Prajogo.

"We'll announce it in a few days ... We still have to talk with Marubeni about the interest rate," he added.

Edwin also said that Marubeni would still have a 20 percent stake in Chandra Asri as agreed by the government in June.

The FSPC group of senior economic ministers, has the final say on the country's major bank and corporate restructuring program.

Separately, Minister of Trade and Industry Luhut Panjaitan said that under the new deal, Prajogo would end up with a stake of less than 50 percent in Chandra Asri, Marubeni 20 percent and the government the remainder.

The government agreed in June to an 80 percent stake in Chandra Asri and Marubeni 20 percent stake.

But the government changed its mind on the grounds that the 80 percent stake would be perceived by the public as a government bailout of the conglomerate.

The government also feared that by owning 80 percent of Chandra Asri, it could be liable to any future debts of the company.

The Japanese creditors, led by Marubeni, had demanded the government take a majority stake in Chandra Asri to ensure that the company would repay its debts.

Chandra Asri, which has been a controversial company from the start of plant construction due to alleged cost mark-up, owes about US$700 million to Japanese creditors and about Rp 3 trillion (US$329.67 million) to domestic banks. The debts to local banks were taken over by IBRA.

The restructuring deal of Chandra Asri has been delayed several times due to difficulties in deciding the difficult issue of the amount of the government stake and the interest rate.

The restructuring of Chandra Asri is one of the key points of the country's restructuring program.

Sources said that Japan's powerful Ministry of International Trade and Industry (MITI) has put strong pressure on the Indonesian government to resolve the restructuring of Chandra Asri, the Tuban petrochemical center, and the Paiton I electricity project. Japan is Indonesia's largest foreign lender.

MITI stressed its demands during a recent meeting in Tokyo with Minister of Trade and Industry Luhut Pandjaitan, sources said.

The Tuban petrochemical center also owes Japanese creditors, while the Paiton I electricity project involves Japanese investors.

The government has been under fire for previous debt restructuring deals due to a combination of poor transparency and questionable terms.

The most prominent case was the restructuring of the giant textile company Texmaco Group, which many said was equal to a government bailout.

Prajogo demanded similar treatment for Chandra Asri.

Restructuring corporate debts is the key to reviving investor confidence in Indonesia and to enable domestic banks to resume lending to the real sector. (rei)