INDRA plans to revise its debt relief scheme
JAKARTA (JP): The Indonesian Debt Restructuring Agency (INDRA) plans to once again revise its debt relief scheme in a bid to attract more participants, according to executive secretary of the private sector debt restructuring team Irzan Tanjung.
He said the revision would include a shortening of the debt extension requirement, and a working capital loan facility for participating debtors amid a relatively lack of credit from the ailing banking industry.
"The concept is still being evaluated," Irzan said on Friday.
Irzan admitted that debt-laden companies and their creditors had been reluctant to join the INDRA scheme partly because they preferred a shorter debt maturity period.
"The INDRA scheme is not feasible ... so it has to be revised," Irzan said.
Under the INDRA debt relief scheme, companies with U.S. dollar-denominated debts are allowed to repay their obligations in rupiah to the agency, which would later repay the foreign creditors in dollars. The participants would be assured of the most favorable market exchange rate.
But prior to joining INDRA, debtors have to first receive approval from their creditors to restructure and extend the debts into an eight-year period.
"This does not match the restructuring agreements reached by many debtors," Irzan said, pointing out that many creditors would agree to extend the debts to a five-year period only.
Debtors seem to concede.
"We're not interested because the eight-year debt extension is too long. We can afford to repay debts in five years," said Victor Franziscus, a director at publicly listed underwear-maker PT Ricky Putra Globalindo.
The company agreed with its foreign creditors in September to restructure some US$32 million in debts, including an extension of syndicated loans to 2004.
"During an early meeting with our creditors, we proposed the debt repayment mechanism offered by INDRA, but they turned down our proposal," said Artine S. Utomo, president of PT BII Finance Center.
"They (creditors) think the eight-year period is too long," she added.
INDRA is a government sponsored agency which was established in August last year to help local companies repay their foreign debts by providing exchange rate protection.
So far, only state-owned investment company PT Danareksa Securities has joined INDRA in settling $147.5 million out of its $196 million total foreign debt.
INDRA's scheme was recently modified following criticism of its inflexibility.
This includes a slight modification to the eight-year debt rescheduling requirement with a three-year grace period.
INDRA chairman Sumitro said in the middle of this year that the eight-year maturity stipulation would no longer apply as long as debtors could get a debt reduction or a debt equity swap from their creditors for at least 20 percent of the total loan.
He added that for every 20 percent of debt relief, the eight- year maturity period could be reduced by one year.
The government has extended the availability of the INDRA facility from the earlier deadline of June 30 to Dec. 31, 1999, in a bid to attract more participants.
Indonesia's outstanding private sector overseas debt totals $67 billion.
Resolving the debt overhang is seen as a crucial step toward the country's economic recovery.
Most local companies stopped repaying their foreign debts after the rupiah tumbled to as low as Rp 17,000 per dollar last year, compared to only Rp 2,450 per dollar before the economic crisis started in July 1997.
In addition to INDRA, the government also launched the Jakarta Initiative Task Force to help facilitate debtors-creditors negotiations for out-of-court debt settlements.
But so far, only some $3.3 billion of debts have been restructured out of the total $23.2 billion in foreign debt currently being facilitated by the Jakarta Initiative. (rei)