Indonesian debt talks begin in Frankfurt

Indonesian debt talks begin in Frankfurt

FRANKFURT (Dow Jones): Debt talks between a delegation of Indonesian government and banking officials and a steering committee of foreign creditor banks started in Frankfurt yesterday.

The Indonesian debt team is headed by Radius Prawiro. On the banking side, the steering committee is co-chaired by Chase Manhattan Bank, Bank of Tokyo-Mitsubishi and Deutsche Bank AG.

On Thursday last week, the Indonesian team met with officials of the three co-chairs in New York to prepare for this meeting.

No official statement was given after the New York preparatory meeting, but officials on both sides said the meeting was successful.

The Frankfurt talks are expected to last at least through Wednesday, with tentative meetings scheduled for Thursday.

Both sides are attempting to restructure more than $80 billion in debt held by Indonesian corporations and banks. The negotiations, originally scheduled for May 26, were delayed to June 1, after political unrest began to rock the country mid-May.

The talks are to cover three types of debt: bank debt, trade financing and corporate debt.

The Frankfurt agenda will focus efforts to finalize two agreements reached in principle during an earlier meeting in Tokyo. One agreement is to extend the maturity of about $8 billion in bank debt. The other is to roll over about $7 billion in trade financing arrangements.

One of the first issues to be discussed may be Indonesia's willingness to pay $700-$800 million in arrears owed to foreign creditors. In Tokyo, the payment of the arrears was one of the foreign banks' demands before moving forward with the debt talks.

In addition, there is the issue of about $64 billion in corporate debt held by private companies and state-owned corporations.

Indonesia originally planned to create a new debt- restructuring agency, Indra, with a view to starting the restructuring program in July. But since the rupiah is still hovering above 10,000 rupiah to the dollar, delays are expected.

The talks involve 13 international creditor banks.

Other members of the Indonesian team are Glen Yusuf, director- general of Indonesia's financial institution affairs and the finance ministry and Simon Subrata, a corporate finance official with Indonesia's Salim Group

Subrata replaces Anthony Salim, the head of the Salim Group, who had been a senior member of the debt team at the last two debt-talk rounds in Tokyo and New York.

Bank Central Asia, which is the banking cornerstone of the Salim Group, was brought under state supervision Friday after a massive deposit run threatened its solvency. The Salim Group is a major debtor.

Meanwhile, Radius expected that the result of the meeting would be positive to Indonesia.

"I am expecting only good things," Radius Prawiro, the chief debt negotiator for Indonesia, told Reuters ahead of the negotiations.

A spokesman for Deutsche Bank AG, co-chair of the talks, said a conclusion was not expected on the first day and the negotiations were likely to continue today.

Prawiro said he planned to spend three days in Frankfurt.

In addition to Deutsche's co-chairs Bank of Tokyo-Mitsubishi Ltd and Chase Manhattan Corp of the United States, 10 other banks are also participating in the discussions.

The meeting was originally scheduled for May 26 in Frankfurt but it was delayed because conditions for discussions were judged unfavorable in light of the political unrest in Indonesia at that time.

Since the delay was agreed, Indonesian President Soeharto has stepped down and handed over power to his protege and deputy B. J. Habibie.