Tue, 14 Nov 2000

Govt approves PT Timor Putra debt restructuring

JAKARTA (JP): The government has approved the debt restructuring of automaker PT Timor Putra Nasional (TPN), allowing the company to continue its Timor national car project in a joint venture with South Korean Kia Motors Corporation.

The Cabinet's Financial Sector Policy Committee (FSPC) said in a statement on Monday that it decided to approve the debt restructuring agreement, which was signed by TPN and the Indonesian Bank Restructuring Agency (IBRA) during its meeting on Friday.

TPN is wholly owned by former president Soeharto's youngest son Hutomo "Tommy" Mandala Putra. Kia and the company formed a joint venture, PT Kia Timor Motors (KTM) in 1997 to produce the Timor cars in Cikampek, West Java.

TPN owes local banks US$521.5 million and the debt has been taken over by the agency.

Under the debt restructuring agreement, FSPC said, TPN would pay the agency $8.62 million in cash and transfer assets worth $5.13 million and at least 69 percent of its shares in Kia Timor Motors to the agency.

However, FSPC did not specify the number of IBRA shares in KTM after the execution of the agreement.

Tommy said during a ceremony to launch the joint venture in February 1997 that TPN had a 35 percent stake in KTM, with Kia Motors holding 30 percent and the remaining 35 percent shares owned by PT Indauda.

FSPC further said the cash payment and asset and share transfer scheme would cut TPN's debt to $466.6 million.

FSPC said of the $466.6 million remaining debt, $160.92 million would be restructured into a 10-year loan with a grace period of three years and a commercial interest rate.

The remaining $305.68 million will be converted to IBRA's shares in TPN.

FSPC noted that the agency could increase its ownership of TPN in support of Kia Motors.

FSPC called on KTM and TPN to reshuffle their management and to soon resume the stalled national car project.

The former Soeharto administration allowed TPN to import Sephia cars made by Kia in Korea without import duty. The cars were renamed the Timor to sell on the domestic market.

Japan, the United States and the European Union protested the special treatment and brought the case to the World Trade Organization (WTO). The WTO ruled that the Indonesian government should stop providing the company with the import duty exemption.

Today, Timor is the country's best-selling car.

FSPC also said it approved the debt restructuring of state- owned aircraft maker PT Industri Pesawat Terbang Nusantara (IPTN).

Under a debt restructuring agreement with the agency, IPTN will repay its debt with a $13 million cash payment and the remaining Rp 1.77 trillion debt will be settled with a debt-to- equity swap method.

Meanwhile, Coordinating Minister for the Economy Rizal Ramli said on Monday that FSPC had yet to make a decision on the debt restructuring of petrochemical firm PT Chandra Asri Petrochemical Industries.

He said the agreement signed by IBRA and tycoon Prajogo Pangestu on the debt restructuring of Chandra Asri's debt on Nov. 3 "is not yet final and has not been approved by the FSPC".

Under the Nov. 3 debt restructuring agreement, Prajogo and his new company PT Zillion Petrochemical Industries will take over the total $626 million debt, which is owed to several local banks, in exchange for a 58.18 percent stake in the company.

The remaining shares will be owned by IBRA (21.82 percent) and Japanese firm Marubeni Corporation (20 percent).

Prajogo and Zillion will repay the debt by issuing rupiah convertible bonds worth about Rp 8.6 trillion based on a fixed rate of Rp 7,500 to the U.S. dollar, which will mature in 15 years and carry an interest rate of 4 percent a year. (jsk)