JITF restructures $10b in corporate debts

JITF restructures $10b in corporate debts

JAKARTA (JP): The Jakarta Initiative Task Force (JITF) said on
Wednesday that 41 indebted companies under its mediation have
finalized the restructuring of US$10.10 billion in debts this
month, close to its target of $12 billion for April.

JITF chairman Bacelius Ruru expressed his confidence in
finalizing the restructuring of $12 billion in debts by April, as
required under the letter of intend (LoI) with the International
Monetary Fund (IMF).

"We only need to mediate the restructuring of another $2
billion to meet the target," Ruru said during a joint press
meeting with the Jakarta Stock Exchange (JSX) management.

Based on JITF's weekly report for Feb. 23, out of 103 bad
debts totaling $18.15 billion, 41 debts worth $10 billion had
been finalized, while 62 other debts worth $8.05 billion were
still in mediation.

The largest debtors include 27 borrowers in the basic industry
and chemicals sector, with $3.54 billion out of $5.07 billion
debts restructured.

Second were firms grouped under light industries, with 21 debt
cases, of which 6 cases worth $2.25 billion had been worked out.

JITF plays a mediator role between debtors and creditors. It
was set up by the government in 1998, to help accelerate the debt
restructuring process of the country's private sector.

JITF's target is included in the LoI, which the IMF evaluates
before disbursing its loans to Indonesia.

Ruru said he expected more companies to join JITF, after the
government had offered them an income tax relief of 30 percent.

Under government regulation No.7/2001, the government provides
tax incentives to firms restructuring their debts under JITF.

During the press meeting, Ruru said that companies under JITF
could also restructure their debts through the capital market.

JSX president Mas Achmad Daniri said that debtor companies
assisted by JITF could float their shares at JSX and use the
proceeds for debt payments.

"This is a good opportunity for them (JITF firms) to become
publicly listed companies," he said.

Daniri added that only companies with good prospects could
hope for a debt restructuring through the capital market.

He said no special measures, other than the exchange's listing
requirements, would be imposed on the indebted firms under JITF.

"We do not force investors to buy any of these shares. If they
(JITF firms) don't show any prospects, their shares will simply
not sell," he explained.

As firms under JITF were in financial difficulties, he
continued, they could only expect to be listed on the exchange's
secondary board. The main board is reserved for financially sound
companies.

The income tax relief should encourage debtors to raise funds
from the public, he said.

Daniri said that debtors had been reluctant to tap the capital
market for fresh funds, for fear they must pay income tax on the
fresh funds raised.

The income tax relief is aimed at allowing debt restructuring
schemes such as debt "haircut" or asset transfer without firms
having to pay income taxes.

Under the previous law, an indebted company whose debt
restructuring process included a debt haircut facility from its
creditors must pay income tax, because theoretically it enjoyed
some income from the debt reduction.

Separately, the Financial Sector Policy Committee (FSPC)
announced its approval of debt restructuring for shoe
manufacturer PT Kasogi International, and hotel operator PT
Manado Tourist Development Corporation.

Kasogi's total debt of Rp 747 billion (about $77 million) will
be restructured using a debt to equity scheme, convertible bonds,
and a credit investment scheme, FSPC said in a press statement.

The company would convert 48.93 percent of its total debts
into equity, and 46.08 percent into convertible bonds carrying a
seven-year maturity period.

The Indonesian Bank Restructuring Agency (IBRA) has the right
to convert the remaining bonds into equity after the redemption
period ends.

The other 4.99 percent of Kasogi's total debts will be
restructured through a five-year credit investment scheme.

FSPC added that Manado Tourist Development Corporation was
required to pay Rp 30 billion of its Rp 88.1 billion debts within
one year but did not provide further details.

FSPC has the final say on major bank and corporate
restructuring programs under IBRA. The committee groups economic
ministers, and was formed last year to ensure good corporate
governance at the agency. (bkm)