Govt approves PT Timor Putra debt restructuring

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)