Govt to review Chandra Asri debt restructuring

JAKARTA (JP): The government will review the debt restructuring scheme for petrochemical firm PT Chandra Asri Petrochemical Center in response to findings claiming the scheme favored Japanese lenders while being disadvantageous to the government.

"We'll review it in line with the OC's finding," State Minister for State Enterprises Laksamana Sukardi told reporters after a meeting of economics ministers, while referring to the Oversight Committee (OC) of the Indonesian Bank Restructuring Agency (IBRA).

According to Laksmana, a pure commercial approach is unlikely to resolve Chandra Asri's debt problems.

"The company is bleeding red ink and has huge debts."

"So aside from a commercial solution, we'll also seek a political solution," Laksamana said.

However, he did not elaborate on what sort of political solution the government had in mind.

A review of Chandra Asri's debt restructuring scheme could jeopardize almost two years of intensive talks between the government and the firm's Japanese creditor, Marubeni Corp.

The Japanese government had urged Indonesia on numerous occasions to quickly resolve the question of Chandra Asri's debt restructuring deal.

Japan is one of Indonesia's largest creditors, and the government hopes to secure further loans from Japan when representatives of the two countries meet in November under the auspices of the Consultative Group on Indonesia (CGI).

Several debt restructuring plans for Chandra Asri have collapsed as the result of complaints by IBRA that the schemes were unfair.

Last June, the government, via the Financial Sector Policy Committee (FSPC), approved another debt restructuring plan for Chandra Asri.

Under the plan, Marubeni was to convert some US$100 million of its $730 million in loans to Chandra Asri into a 20 percent equity stake in the company.

The rest of the loans were to be repayable over a 15-year period with an interest rate of 1.5 percentage points above the London interbank offered rate (Libor).

Meanwhile IBRA, which has some Rp 3 trillion (about $334.4 million) in loans to Chandra Asri, would convert a much greater portion of its loans into a 31 percent stake in the company. The other 49 percent stake would remain in the hands of Prajogo Pangestu, the company's founder.

The scheme, however, was lambasted by the Oversight Committee as violating IBRA's debt restructuring guidelines.

"IBRA would have maintained a sustainable loan of $263 million as compared to $50 million under the FSPC scheme," the Oversight Committee said.

It said that despite IBRA converting 89 percent of its debt and Japanese lenders converting 14 percent of theirs, the Japanese ownership would be diluted to only 3.8 percent, down from 23.8 percent previously.

The committee also said the chances of recovering the debts owed to IBRA would possibly be greater if Chandra Asri were to be liquidated or sold rather than maintained as a going concern.

"Looking at it from a purely commercial perspective, the restructuring scheme is clearly disadvantageous to IBRA and advantageous to Marubeni," the Oversight Committee said.

The debt restructuring guidelines were established by the FSPC and are supposed to protect the public interest during corporate debt workouts.

The announcement of the committee's review of the Chandra Asri debt restructuring plan was made at the request of the International Monetary Fund (IMF).

The Fund has required the government to publish the review results, which covers four other companies as well, as a precondition for the signing of the new Letter of Intent (LoI).

Under the new LoI, the government has pledged to announce a further 10 debt restructuring reviews by the end of October.

The committee said it had reviewed the restructuring schemes of IBRA's 32 debtors.(bkm)