Govt softens stance on debtors

Minister of Finance Boediono issued on Friday a decree on Friday to encourage out-of-court settlements for companies owing debts to the state by offering huge discounts on debt principal and the writing off of interest arrears and penalties.

In a press statement, the ministry said that "haircuts" would be given to debtors who had been challenging the debt settlement mechanisms imposed by the now-defunct Indonesian Bank Restructuring Agency (IBRA) in the courts since May 1.

"The decree is aimed at speeding up the government's efforts to recover as much of its money as possible," said the statement.

Under the decree, debtors owning debt principal of up to Rp 5 billion (some US$555,000), or $581,395, will be given a 50 percent haircut, and a write-off (100 percent discount) on interest arrears and penalties. In order to be eligible, a debtor must settle his debt within three months.

Debtors who need between three months and five months to settle their debts will be given a 40 percent haircut on the principal and a write-off on interest arrears and penalties.

Debtors who owe between Rp 5 billion and 10 billion, or $1.16 million, and who manage to settle their debts within three months will be given a 35 percent discount on the principal and a write-off on interest arrears and penalties.

In the case of those who need between three months and five months to settle their debts, the ministry will give a 25 percent haircut on the principal and a write-off on interest arrears and penalties.

The ministry will later arrange another settlement scheme for debtors owing more than Rp 10 billion. -- JP