JITF feels confident to meet debt restructuring target
JAKARTA (JP): The Jakarta Initiative Task Force (JITF) says that it is confident of being able to meet the government's target of restructuring between US$8-10 billion of private sector debt despite the current volatility in the rupiah and the limited time available.
JITF chief operations officer Samuel Tobing said the task force was currently handling some 49 corporate debt restructuring projects worth around US$9.7 billion.
He said that a restructuring deal must be reached for 30 percent to 50 percent of the debt over the next two months in order to meet the target.
"We're on track to meet the $8-10 billion target," he told The Jakarta Post.
He said that according to the government's letter of intent to the International Monetary Fund, the target for the JITF this year is the restructuring of between $8-10 billion in corporate debt. So far the task force has only restructured debts amounting to some $5.3 billion.
"The (macro economic) condition is less encouraging, but most of them (debtors and creditors) continue to negotiate," he explained.
He said that with regard to the volatility of the rupiah, debtors and creditors could seek a way out including fixing the rupiah rate at a certain level or agreeing on a hedging mechanism.
"Most of them think that now is the right time to fix a deal. Delay has its own costs," he added.
Tobing was responding to an earlier report that the JITF might not reach the $10 billion target because, with only two months to go and amid the volatility in the rupiah, it had only managed to restructure around half of the debt.
The rupiah has been hovering at near the Rp 9,000 per U.S. dollar level compared to the government's 2000 target of Rp 7,000 per dollar.
The JITF was formed by the government in 1998 to help accelerate the debt restructuring process of the country's private sector. The task force plays a mediator role between debtors and creditors including talking to the government in case a restructuring process meets regulatory obstacles.
Debtors cannot be forced to use the JITF's services as the approach is on a voluntary basis.
Based on the government decree, the JITF can only handle debt worth more than Rp 100 billion or debt that involves foreign creditors.
Tobing said that a mediation schedule had been reached for most of the 49 debt cases, under which Memoranda of Understanding (MoU) should be signed before the end of this year.
"Most of the deals will be sealed in December, particularly the large debt cases," he said, pointing out that large restructuring cases involved debt worth more than $500 million per debtor.
He explained that if a debtor deliberately failed to meet the agreed schedule, it would be categorized as an uncooperative debtor and could risk sanctions.
The JITF uses the carrot and the stick approach to help accelerate the restructuring process. The carrots for cooperative debtors include a tax break facility and a dispensation for publicly listed indebted companies from being delisted by the Jakarta Stock Exchange. The sticks include transferring the uncooperative debtors to the Attorney General's Office for possible legal proceedings.
According to a recent World Bank report, Indonesia's corporate debts, including those owed by state-owned enterprises and small and medium enterprises, totaled $119.7 billion.
The Bank said that $58.4 billion or around 49 percent of the total debt was owed to foreign creditors, and that another $5.6 billion in debt had been taken out through the issuance of notes.
The remaining debt is owed to local banks.
Restructuring the corporate debt is seen as a crucial factor in helping to revive investor confidence, including the inflow of foreign funds into the ailing economy.
The restructuring program is also the key to helping ease pressure on the rupiah.
Bank Indonesia said recently that the country's private sector foreign debts falling due in the fourth quarter of this year were estimated to reach more than $9.2 billion.(rei)