Govt softens stance on debtors

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