Indonesia likely to launch debt restructuring plan
Indonesia likely to launch debt restructuring plan
NEW YORK (Dow Jones): Indonesia is aiming to launch a program to restructure between US$8 billion and $10 billion in bank debt by the end of June, a source familiar with the country's debt restructuring plan said Wednesday.
Indonesia and its bank creditors agreed earlier this month to a plan to restructure about $80 billion in foreign private debt held by Indonesian banks and corporations.
One portion of the plan offers to exchange bank debt coming due this fiscal year into new loans guaranteed by the country's central bank.
The source said that if Indonesia can launch the exchange program by the end of June, the so-called road show to market the offer to creditors would begin on July 6.
Under the bank debt restructuring plan, creditors will have the option to roll over existing credits to Indonesian banks into new loans with maturities of one, two, three and four years with yields of 2.75 percent, 3 percent, 3.25 percent over the 3.5 percent, respectively, over the London Interbank Offered Rate.
Before launching the plan, however, Indonesia will need to pay up to $1 billion in arrears due on bank debt and trade finance arrangements.
The source said that Indonesia was aiming to pay all arrears on trade financing by the end of the month, but would like to pay only arrears on interests on the bank debt and have the principal of the arrears incorporated in the debt exchange program.
Under the term sheet agreed to in Frankfurt, creditors choosing to extend the maturity of their credits to banks for new loans will be allowed to exchange up to 15 percent of the debt for one-year loans and up to 30 percent for two-year loans. But creditors will have to exchange a minimum of 10 percent for four- year loans.
The payment of the arrears is a condition for the comprehensive debt plan agreed to in Frankfurt to move forward.
As part of that program, Indonesia and its creditors agreed to keep existing trade financing arrangements at current levels of $4.2 billion to $4.4 billion. The plan also involves an eight- year rollover of up to $60 billion of non-bank corporate debt, including a three-year grace period effective Dec. 31.
Banking sources said that it would be difficult to assess whether the payment of arrears had began before next week. But some analysts attributed some of the recent dollar buying in Indonesia, which pushed the U.S. currency to more than Rp 16,600, to activities by banks and companies aiming at paying up arrears to their creditors.