Govt to review Chandra Asri debt restructuring

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)