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

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.