IBRA, Marubeni fail to reach agreement on debt

JAKARTA (JP): Indonesian Bank Restructuring Agency (IBRA) chairman Edwin Gerungan said on Wednesday the agency had not yet reached an agreement with Japan's Marubeni Corp. on the restructuring of petrochemical giant PT Chandra Asri's foreign debt.

With the Japanese creditors continuing to insist on an earlier agreed to restructuring plan, Edwin said IBRA would continue the negotiations with the hope of reaching a deal.

"They still insist on the old plan," he said on the sidelines of a hearing between the finance ministry and House of Representatives Commission IX for the state budget and finance.

In a memorandum of understanding signed last June by the government and Marubeni, the Japanese creditors were to convert about US$100 million of the debt owed it into a 20 percent equity stake in Chandra Asri. The remaining debt was to be repaid over 12 years with an interest rate of 2.5 percentage basis points above the London Interbank Offering Rate (Libor).

In return, the government, through IBRA, was to convert Chandra Asri's local debt into an 80 percent equity stake in the company.

But the June MOU was called off by the government following criticism that it favored Chandra Asri's founding shareholders, including Prajogo Pangestu. The critics said if the government took an 80 percent equity stake in the company, it would risk having to take on the future liabilities of Chandra Asri.

IBRA officials said recently they expected to reach a new deal with Marubeni sometime in the middle of this month.

The agency said it proposed three new options to Marubeni earlier this month in an effort to reach a deal to restructure Chandra Asri's debt.

The agency has not disclosed what the options are, but sources have said they are liquidation, debt restructuring or sale to a strategic investor.

In any new debt restructuring deal, the government wants Marubeni to lower the interest rate on the Chandra Asri debt so that is the same as Libor, extend the repayment period to 15 years and increase its equity participation in Chandra Asri.

Marubeni earlier said it would only agree to lower the interest rate to 1.5 percentage points above Libor.

Chandra Asri owes about US$700 million to a consortium of foreign creditors led by Marubeni. The petrochemical firm also owes about Rp 3 trillion to IBRA, a unit of the finance ministry. The agency took over the debts from local banks.

The restructuring of Chandra Asri's overseas debt is an important part of the country's corporate restructuring program and is being closely followed by foreign investors.

Restructuring corporate overseas debt is seen as key to helping revive foreign investor confidence in the economy.

The government reached an agreement with Chandra Asri founder Prajogo Pangestu in November last year. The deal reduced the government's stake in Chandra Asri to 31 percent, while Prajogo ended up with a 49 percent stake, for which he had to transfer ownership in about 20 companies to IBRA.

Chandra Asri had been a controversial company since construction began on its petrochemical plant in the early 1990s.

The founders of Chandra Asri, including a son of former president Soeharto, managed to convince state banks to finance construction of the plant, located in West Java's Cilegon industrial park, without first analyzing the company's business plan.

Several Japanese lenders, including Bank of Tokyo-Mitsubishi, Fuji Bank and JICA, joined Marubeni in helping to finance the project.

But the Asian financial crisis that began in the middle of 1997 catapulted Chandra Asri into deep financial woes. The loan the company received from domestic banks turned sour and IBRA had to take over the loans to save the banks. (rei)