Jakarta Initiative seeking $2.5b to help restructuring

JAKARTA (JP): The Jakarta Initiative Task Force chairman Jusuf Anwar said on Monday that he was inviting multi-national companies (MNCs) to provide at least US$2.5 billion to be used as working capital for indebted local companies.

He said on Monday that talks had started with three MNCs which had shown an interest in providing interim funding for viable indebted companies.

"This is among the carrots we're planning to dangle in front of companies willing to undertake restructuring programs under the auspices of the Jakarta Initiative," he told reporters after speaking at the annual conference of the Indonesian Real Estate Developers Association.

The Jakarta Initiative Task Force was launched last month to provide facilities designed to encourage debtors and creditors to come to the negotiation table to reach out-of-court debt settlements through a process of restructuring.

The sharp depreciation of the rupiah against the U.S. dollar has left most local companies unable to repay their overseas debts, which together amount to more than $63 billion. Local debts, which total more than Rp 600 trillion, have been similarly affected.

The government has encouraged debtors and creditors to reach out-of-court debt settlements to save large numbers of indebted companies from liquidation resulting in widespread job losses.

Jusuf said that the government was also considering offering tax neutrality to companies engaged in a restructuring process.

He explained that Bank Indonesia, the central bank, issued a new ruling on bank loan restructuring on Nov. 12. The ruling contains seven points of guidance for local banks to follow when restructuring their customers' debts.

"These will help to guide banks daring enough to enter restructuring deals. They should also help to appease bankers' fears that they will be accused of KKN if they offer to forgive or restructure debts owed to them," he said.

KKN is the local acronym for corruption, collusion and nepotism.

Under Bank Indonesia guidance, local banks can provide debtors with a variety of restructuring measures including debt reduction, extension of maturity and lowering of interest rates.

Jusuf urged both debtors and creditors to begin negotiating restructuring deals, stressing that the government would not bail them out off their current difficulties.

"We're providing carrots now, but when the time comes we'll also be waving the sticks," he said.

He added that more than 50 companies with combined debts of over $8 billion had asked the Jakarta Initiative to assist in initiating corporate restructuring programs.

Earlier this month, the government announced that only 25 companies with combined debts of $5 billion had asked the Jakarta Initiative for assistance.

"The number is growing. I'm sure more companies will come to us soon," Jusuf said. (rei)