Jakarta upbeat on corporate debt restructuring prospects
Jakarta upbeat on corporate debt restructuring prospects
JAKARTA (JP): Chairman of the Jakarta Initiative corporate
debt restructuring task force Jusuf Anwar has said he is
optimistic that dozens of indebted companies will begin a debt
restructuring process following a creditor-debtor forum to be
held here next week.
Jusuf said on Friday that foreign creditors were now more
willing to tread a path toward out-of-court debt settlements in
the wake of positive developments in the economy.
"I'm confident that after next week's gathering we will be
flooded with clients," he told The Jakarta Post and Kompas
newspapers in an interview.
The creditor-debtor conference, to be held at the Jakarta
Convention Center on Nov. 2 and Nov. 3, will bring together
experts in corporate restructuring and the representatives of
multilateral financial institutions, creditors, debtors and
government officials.
Around 600 professionals, 40 percent of whom are from
international financial firms, have confirmed they will attend
the conference which is being sponsored by the World Bank.
Jusuf said the conference would try to develop an
understanding of the hurdles faced by both creditors and debtors
trying to bring about corporate restructuring.
Debt restructuring is the main focus of the overall corporate
restructuring process. Companies need to revise their balance
sheets by stripping debt down to a level that they can afford to
repay.
The restructuring process is expected to involve debt
forgiveness, extended maturity periods, debt-for-equity
conversion and swap of assets.
Jusuf said the mood during a recent gathering of 200 foreign
creditors in Washington was very positive.
"They want to get their money back, so they want to make a
deal," he said.
"It's not true that there was a deadlock. The way has been
opened. They want to come and are prepared for a dialog. They
believe the prospects for our country are good," he added.
Jusuf said that local companies were now aware that
restructuring offered a better option than settlements reached in
court.
"The faster you restructure the more value you get, and the
longer you put it off the less value you get," he said.
"Twenty companies have recently come to us to find a way to
accelerate the restructuring process," Jusuf added.
Richard A. Gitlin, an advisor to the task force, said 20
companies had recently approached the Jakarta Initiative seeking
a way to accelerate restructuring of their operations.
"That was surprising because we haven't started the debt forum
yet," he added.
The Jakarta Initiative was launched in September to help
debtors and creditors -- both foreign and domestic -- come to
agreement over restructuring deals.
In an effort to facilitate the restructuring process, the
government has also removed various regulatory obstacles and
provided incentives for corporate restructuring.
The Jakarta Initiative will complement the Indonesian Debt
Restructuring Agency (INDRA), under which debtors that have
reached a restructuring agreement with their creditors can join
the agency's framework and are guaranteed the necessary hard
currency.
The country's private sector holds around US$64 billion in
overseas debt, of which $22 billion falls due this year.
The Jakarta Initiative will also help companies that owe more
than Rp 600 trillion to local banks.
Gerald Meyerman of the World Bank said separately that the
bank, along with the Asian Development Bank, would provide
technical assistance loans to help the Jakarta Initiative.
At the end, however, corporations have to pay all the costs of
using the facilities offered by the initiative because the
government has taken a decision not to subsidize corporations.
"However, we should not only think of the cost of
restructuring. We should also talk about the cost of not
restructuring because the cost of not restructuring is
bankruptcy," he said.
Analysts have expressed concern that creditors are beginning
to show a preference for debt settlement through court actions
after becoming frustrated in their attempts to negotiate with
local debtors.
But this attitude is changing, Gitlin said.
"The good news is that more and more creditors are realizing
that the Jakarta Iniative can help. I see the trend of creditors
becoming much more positive," he said.
"We receive extremely positive response from people like Chase
and Deutsche Bank," he added.
Chase Manhattan Bank and Deutsche Bank are among the largest
foreign creditors in this country.
"Indonesia has a strong economic base. It has some of the most
valuable natural resources in the world and it has some of the
best entrepreneurs in the world," Gitlin pointed out. (rei/rid)