Wed, 13 Dec 2000

Govt fails to reach deal with Prajogo over assets

JAKARTA (JP): The government failed on Tuesday to reach a deal with tycoon Prajogo Pangestu to surrender his personal assets to repay debt.

The Financial Sector Policy Committee (FSPC) said that the assets proposed by Prajogo did not meet the criteria set by the committee.

"The additional assets offered today by the shareholder of Chandra Asri do not meet the requirements of the FSPC. So, Chandra Asri has been granted additional time to surrender its assets," said FSPC in a press statement prepared by Inke Maris, a private public relations manager.

The statement did not say what assets had been proposed by Prajogo and when the new deadline would be. The statement was issued following a late evening meeting of the FSPC with Chandra Asri's officials.

Reports have earlier said that Prajogo was planning to offer his stakes in chemical firm PT Try Polyta, and in timber companies PT Barito Pacific and PT Tanjung Enim Lestari.

Prajogo is the founder of the giant petrochemical firm Chandra Asri, which owes more than Rp 3 trillion to the Indonesian Bank Restructuring Agency (IBRA).

The company also owes around US$700 million to a consortium of foreign creditors led by Japan's Marubeni Corp.

The FSPC recently reached a restructuring deal with Prajogo over Chandra Asri's debt to IBRA, under which the government via IBRA would own 31 percent of the company, Prajogo 49 percent, and Marubeni 20 percent.

Under the deal, Prajogo, through his company PT Inter Petrindo Inti Citra (IPIC), would take over $638.6 million of Chandra Asri's foreign debts and Rp 120 billion of its local debts.

Coordinating Minister for the Economy Rizal Ramli had demanded that Prajogo provide his personal assets to IBRA as part of the debt restructuring deal.

Rizal also heads the FSPC which groups several senior economic ministers. The committee has the final say on the country's major bank and corporate restructuring deals.

The deadline for Prajogo to surrender personal assets was actually last week, but Rizal then granted a second deadline (today), which was again extended.

Rizal had earlier said that if Prajogo failed to meet Tuesday's deadline he could risk severe action from the government.

IBRA Chairman Edwin Gerungan declined to comment.

Irwan Siregar, deputy chairman of IBRA who handles debt restructuring at the agency, also would not comment.

"Please ask Inke Maris," he said.

The government has been under fire over its restructuring deals with top conglomerates who thrived during the era of authoritarian rule of former president Soeharto.

The government initially agreed to take over 80 percent of Chandra Asri, but the government later changed its mind following criticism that the deal was a bailout. The government also feared that by taking an 80 percent stake, it could become liable to future debts of Chandra Asri.

The FSPC is also negotiating with Marubeni to reach an agreement on new terms.

The FSPC had ordered IBRA to continue negotiations with Marubeni to persuade the Japanese firm to take more risks in Chandra Asri by converting the latter's debt into a greater amount of equity, lowering the interest rate, and extending the maturity of the debt.

The government also wanted the interest rate to be reduced from the current 2.5 percent over Libor (London Interbank Offering Rate) to zero percent plus libor, and the repayment period of Chandra Asri's foreign debt to be extended to 15 years from 12 years.

IBRA is a unit of the finance ministry. The agency received around Rp 260 trillion worth of bad debts from the country's ailing banks and closed down banks. It is mandated to restructured the debt.

Chandra Asri is one of IBRA's top debtors.

Separately, IBRA said on Tuesday in a press statement that it had reached a restructuring deal with state owned aircraft manufacturer PT Industri Pesawat Terbang Nusantara over some Rp 1.87 trillion debt through a combination of cash settlement and debt to equity swap.

IPTN is an aircraft company founded by the former president B.J. Habibie who was research and technology minister at the time. The company had borrowed heavily from state-owned banks.

The agency also said that it had reached a restructuring deal with Inti Group over a Rp 809.85 billion debt. IBRA did not mention the group's line of business.

IBRA is targeted to restructure the debts of its 21 top debtors by the end of this year, including those involving cash settlements.

The agency must raise around Rp 18.9 trillion in cash in the current budget year ending Dec. 31, 2000 which will involve selling various bank assets under its management.

IBRA has so far raised around Rp 16 trillion. The proceeds will help finance the 2000 budget deficit estimated at 3.2 percent of gross domestic product. (rei)