Indonesia's corporate debt restructuring to accelerate

Indonesia's corporate debt restructuring to accelerate

SINGAPORE (Reuters): Corporate debt restructuring in Indonesia
is gathering pace and may speed up if the potential for more
political turmoil looms, Indonesian government advisers said on
Thursday.

The advisers were speaking on the sidelines of a conference.

"The momentum will accelerate," said Edward Gustely,
consultant to the government-backed Jakarta Initiative Task
Force, which has been charged with encouraging out-of-court
negotiations for corporate debt settlement.

"If creditors and debtors feel there is any uncertainty then
now is the time to strike the deals and finalize them as soon as
possible because we don't know how things will take off from
there," he told Reuters.

Chairman of the Jakarta Initiative, Jusuf Anwar, told Reuters
the agency has made progress in the 60 days since it first
started operations last year.

He said the Jakarta Initiative has in the past two months of
operation, managed to help nine Indonesian companies with an
aggregate debt of 1.5 billion rupiah begin a restructuring
process that could keep them out of the courts.

"We have around 100 active cases, and some more still
exploring the possibility of joining us," Yusuf told Reuters.

"The progress in terms of what has been achieved by the
Jakarta Initiative is very encouraging. Companies keep coming,
both lenders and borrowers. On the other side, the commitment of
the government to recapitalize the financial as well as real
sector is there."

Yusuf and Gustely, speaking on the sidelines of a conference
about the agency, estimated the total debt of the 100 companies
which they were now helping to be some US$12 billion.

The Jakarta Initiative was formally launched in November.

The Indonesian government drew up a set of suggested
principles for debt restructuring talks between the country's
beleaguered companies and their creditors and said firms which
joined the scheme could also make use of consultants provided by
the government.

Indonesia has said that out-of-court settlements, probably
involving debt-for-equity deals and substantial debt forgiveness,
were preferable to settling corporate debt disputes through the
country's fledgling, much-criticized bankruptcy courts.

Yusuf said a large part of the Jakarta Initiative's work was
convincing debt-ridden companies that they had to restructure in
the first place.

"My main obstacle is that the restructuring culture within our
business and banking community is not that widespread yet, we
have to keep socializing what the restructure is all about."

Participation in the Jakarta Initiative was voluntary and
Indonesia said it has no plans for a blanket state-sponsored
bail-out of indebted companies hit by the economic crisis and a
plunge in the value of the rupiah since July 1997.

Indonesia has a private sector debt burden of some $80 billion
and analysts have said the restructuring of the debt burden was
key to getting the country's economy back on its feet.