Government proposes three options to Marubeni
Government proposes three options to Marubeni
JAKARTA (JP): The government has proposed three new options to
Japan's Marubeni Corp. in a bid to reach an agreement to
restructure the overseas debt of petrochemical company PT Chandra
Asri, according to an IBRA official.
The deputy chairman of the Indonesian Bank Restructuring
Agency (IBRA), Irwan Siregar, said on Wednesday the agency
planned to meet with Marubeni officials this week or next week,
with the results of the meeting to be delivered to the Financial
Sector Policy Committee (FSPC) on Feb. 20 for approval.
"I cannot disclose the options yet. We still have to discuss
them with Marubeni," he said following a meeting with FSPC, which
groups several senior economic ministers and has the right to
final approval of major corporate and bank restructuring
agreements.
But IBRA chairman Edwin Gerungan said the options included the
government's demand for a low interest rate on the debt.
He added that other features in the options included voting
rights, greater equity participation for Marubeni in Chandra Asri
and management issues, though he declined to provide further
details.
The restructuring of Chandra Asri's overseas debt is a key to
the country's corporate restructuring program, and is being
closely watched by foreign investors. Restructuring corporate
overseas debt is seen as vital to reviving the confidence of
foreign investors in the economy.
Chandra Asri owes about US$700 million to a consortium of
foreign creditors led by Marubeni. The petrochemical company also
owes approximately Rp 3 trillion to IBRA. The government already
has approved the restructuring of Chandra Asri's local debt.
Negotiations with the Japanese creditors have been difficult,
with Marubeni maintaining its demand the government stick to an
earlier deal.
The government signed a memorandum of understanding on a debt
restructuring agreement with Marubeni in June last year. Under
the deal, Marubeni was to convert some $100 million of the money
owed it into a 20 percent equity in Chandra Asri, while the
government, via IBRA, was to convert the company's local debt
into an 80 percent equity.
Marubeni also agreed at the time to give Chandra Asri 12 years
to repay its remaining foreign debt, with an interest rate of 2.5
percentage points above the London Interbank Offering Rate
(Libor).
But the FSPC chose to cancel the deal following criticism that
it would expose the government to covering future liabilities of
Chandra Asri because of its majority ownership in the company.
The FSPC has since demanded a debt restructuring deal that
includes a low interest rate, greater equity participation for
Marubeni in Chandra Asri and a debt repayment period of up to 15
years.
Marubeni expressed its willingness in November last year to
lower the interest rate of Chandra Asri's debt to 1.5 percentage
points above Libor, but the government demanded a rate equal to
Libor.
The government reached an agreement with Chandra Asri founder
Prajogo Pangestu in November last year to restructure the
company's local debts. Under the deal, the government's stake in
Chandra Asri was lowered to 31 percent, while Prajogo ended up
with a 49 percent stake, while agreeing to transfer personal
assets (ownership in around 20 companies) to IBRA.
Chandra Asri had been surrounded by controversy since
construction on its petrochemical plant began in the early 1990s.
The founders of Chandra Asri, including a son of former
president Soeharto, convinced several state banks to finance the
plant, located in West Java's Cilegon industrial area, without
first submitting their business plan for a proper analysis.
Several Japanese lenders, including Bank of Tokyo-Mitsubishi,
Fuji Bank and the Japanese International Cooperation Agency,
joined Marubeni to help finance the project.
But the Asian financial crisis that began in the middle of
1997 left Chandra Asri in serious financial trouble. The loans
from the domestic banks turned sour and IBRA had to take over the
loans to save the banks.(rei)