IBRA vows to execute FSPC decision

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) pledged on Tuesday to fully implement the decision of the powerful Financial Sector Policy Committee (FSPC) on the restructuring of the massive debt of petrochemical giant PT Chandra Asri.

"It's the decision of the FSPC, why should it not be implemented?... We're only the executor," IBRA deputy chairman Irwan Siregar told reporters following a meeting with the FSPC.

"We have no objection," he added.

Asked whether IBRA was unhappy with the final debt workout scheme approved by the FSPC, Irwan said: "The decision of the FSPC has been made based on thorough consideration, while IBRA's view is based only on commercial consideration."

He declined to provide further comments.

Irwan was commenting on a Tuesday report in this paper quoting sources as saying that the debt restructuring of Chandra Asri could fall apart due to IBRA's disappointment over the FSPC scheme.

The FSPC groups several senior economic ministers and has the final say on the country's major corporate restructuring program. The committee is led by Coordinating Minister for the Economy Rizal Ramli.

Rizal said last week that Japan's Marubeni Corporation, Chandra Asri's leading foreign creditors, had agreed to the terms set by the FSPC over the restructuring of Chandra Asri's US$730 million foreign debt.

Rizal called on IBRA to expedite the finalization process of the technical details of the debt restructuring agreement with Marubeni.

Informed sources said more than 50 documents would have to be drawn and signed by shareholders and creditors to complete all the technical details of the debt-restructuring scheme.

But IBRA chairman Edwin Gerungan was quoted late last week by the media as saying that he was unhappy with the deal, pointing out that Marubeni should have converted more of its loans into equity stake in Chandra Asri.

Under the FSPC final scheme, Marubeni will only convert $100 million of its $730 million loans into 20 percent equity shares in Chandra Asri, while the remaining debts would be rescheduled to 15 years with annual interest floating 1.5 percentage points above the London Interbank Offered rate (Libor).

IBRA is set to convert $375 million, of the $425 million loans it took over from domestic banks, into a 31 percent share ownership and leave the remaining $50 million as an outstanding loan to Chandra Asri, making IBRA also a creditor at the company.

The remaining 49 percent of the petrochemical company will be owned by founding shareholder, Prajogo Pangestu.

The final debt workout was decided by the FSPC and was approved in June and November last year by President Abdurrahman Wahid mainly in terms of the interest rate, maturity of debt, and IBRA's creditor status. Under the initial plan, Marubeni would be the sole creditor of Chandra Asri.

IBRA and the FSPC had been involved in 19 months of negotiations with Marubeni to revise the earlier MOUs, which sources said involved high level political lobbyings by both Indonesia and Japanese governments.

IBRA's Edwin has often said that the agency wants to see Marubeni converting more of its loans into greater equity shares in Chandra Asri, rather than lowering the interest rate from 2.5 percentage points above Libor or extending the maturity of the debt from 12 years to 15 years.

But as the negotiation process with Marubeni dragged on, the FSPC decided to take over the process, leaving IBRA in the back seat, sources said.

Marubeni chief operation officer in Indonesia T. Murakami told The Jakarta Post on Monday that foreign creditors decided to accept the terms set by the FSPC in "good faith," to allow the restructuring of Chandra Asri's debts be completed as quickly as possible.

Murakami stressed that quick finalization of the debt restructuring is vital to saving Chandra Asri, warning that further delays in finalizing technical details could severely damage the West Java-based olefins center as it could run out of cash and stop production by the end of next month.

"If this happened, Chandra Asri would lose its customers to other competitors in Thailand, Singapore or Malaysia," he cautioned. (rei)