Govt, Marubeni agree on Chandra Asri $1.2 billion debt restructuring

Berni K. Moestafa and Dadan Wijaksana, The Jakarta Post, Jakarta

The government and Japan's Marubeni Corp. have finally agreed on a scheme to restructure US$1.2 billion in debts owed by the PT Chandra Asri Petrochemical Center, in a deal that could mark the end of a two year negotiation process.

Secretary of the Financial Sector Policy Committee (FSPC), Syafruddin Temenggung said on Thursday that Marubeni had agreed to lower the terms imposed on Chandra Asri's debt payment.

Chandra Asri owes the government $463.3 million and another $723.6 million to Japanese lenders, led by Marubeni.

Under a debt for equity swap, Marubeni agreed to convert $147 million into a 24 percent stake in Chandra Asri.

Previously, Syafruddin said, the Japanese firm had agreed to convert only $100 million for a 20 percent stake.

The remainder of its debts Chandra Asri must pay at rates of 1.25 percentage points above the London Interbank Offered Rate (Libor).

This cuts 0.25 percentage points from Marubeni's earlier demand of 1.5 percentage points above the Libor, he said. The payment he said would be stretched over a 15-year period.

FSPC took over Chandra Asri's debt restructuring talks after the company was transferred as collateral to the Indonesian Bank Restructuring Agency (IBRA). It was formerly owned by conglomerate Prajogo Pangestu.

The committee, which groups several senior economics ministers, is in charge of restructuring high-profile debt cases worth over Rp 1 trillion (about US$97.56 million).

Chandra Asri's deal may have removed a thorny issue from Indonesia's relationship with Japan, a large donor to the country.

Past restructuring schemes were scrapped after critics accused the government of bowing to political pressure from Japan.

"I don't see any pressure here, I have been involved in the negotiation since the beginning," Syafruddin explained.

The previous deal faced the axe after an independent review committee found that it was disadvantageous to IBRA.

With Marubeni then agreeing to only a 20 percent stake, IBRA was left with a hefty 80 percent stake for its $463.3 million.

But scrapping the deal prolonged the uncertainties that had been plaguing the petrochemical project. On a number of occasions, the Japanese government urged Indonesia to wrap up Chandra Asri's debt talks.

The latest deal also comes at a time when the government is hoping to secure more loans in next month's meeting of the Consultative Group on Indonesia (CGI).

Japan has been one of the largest contributors during previous CGI meetings.