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)