INDRA extends entry deadline
INDRA extends entry deadline
JAKARTA (JP): The Indonesian Debt Restructuring Agency (INDRA) has extended the deadline for entry to its program from June 30 to Dec. 31 because there have been no takers so far.
INDRA chairman Sumitro said on Thursday that the agency would provide additional incentives, including a flexible period of debt payment.
He added that most companies were expected to reach agreement with their foreign creditors during the second half of the year.
"This is because companies are still facing limited cash flow, unpredictable inflation rates, as well as unfavorable (social and political) conditions."
Sumitro said two companies were ready to join INDRA's program, but declined to identify them.
INDRA is a government-sponsored agency established in August 1998 with the objective to help restructure the country's US$65 billion in private-sector overseas debts.
Under the program, which is a result of the Frankfurt agreement with a creditors' committee in June, debtors joining the scheme must first seek approval from their lenders to reschedule the debts over eight years, including a three-year grace period.
Debtors would then make monthly installments in rupiah, based on an INDRA-set conversion rate, and INDRA would pay the lenders in dollars. Payment would only cover interest during the grace period.
The conversion rate is expected to improve over time, but is guaranteed not to worsen.
Debtors entering the debt restructuring scheme at a higher exchange rate will receive a refund of the difference on Dec. 31, 1999, when INDRA resets the exchange rate.
The program also contains a reset window facility, giving debtors an option to change the rupiah-U.S. dollar rate at which they locked into the scheme after a period of two years.
INDRA will reset the exchange rate on Jan. 1, 2001, based on the best exchange rate in the period from Oct. 1 to Dec. 31, 2000.
"The reset rate would be used only if it is better than the rate locked in on Dec. 31, 1999," Sumitro said.
He noted that the reset window facility was to enhance the program's appeal because it was widely believed that the rupiah's current exchange rate was unrealistically low.
Companies wanting to join INDRA must have registered their debt with Bank Indonesia by June 30, Sumitro said.
Those joining INDRA before June 30 would be given the "early bird" incentive of a 0.5 percentage point cut in interest rates.
The basic rupiah interest rate that will be applied to debtors has been set at 5.5 percent per annum plus the rate of inflation.
The program also offers debtors a number of payment options -- always at the consent of their creditors -- which include cash payment, accelerated payment, the option to cover an interest rate higher than London Inter-Bank Offered Rates (LIBOR) and an exchange rate "buy-down" option.
INDRA would also accommodate debtors, with agreement from creditors, to pay their offshore debt at a fixed interest rate.
"In this matter, INDRA would swap the fixed rate with a floating rate based on LIBOR," Sumitro said.
INDRA also offered incentives for companies that secured a debt reduction or grace period from creditors.
The agency would reduce the payment period by one year for every 20 percent debt reduction a company receives.
Companies obtaining a grace period for debt principal payment will pay only 15 percent of total debt to INDRA per annum during the grace period.
Firms which gain a grace period for both interest rates and debt principal need to pay only 7.2 percent of their total debt per year. (rid)