JITF sees more corporate debt converted into equity
JITF sees more corporate debt converted into equity
JAKARTA (JP): Chairman of the Jakarta Initiative Task Force
(JITF) Bacelius Ruru said on Thursday that there had been a
growing amount of corporate foreign debt being converted into
equity in the debt restructuring processes mediated by the task
force.
Bacelius said that the trend indicated that foreign investors
were still confident about the fundamental prospects of local
companies.
"Over time there are more debts being restructured using debt
to equity swaps. This is a positive trend," he told reporters.
He added that the conversion of debt into equity would also
help reduce pressure on the ailing rupiah as such conversions did
not require any dollar payments.
Chief operating officer of the JITF Samuel Tobing said that
based on the restructuring results last year, out of every 100
U.S. cents of restructured debt, an average 34 cent was converted
into equity.
Samuel said that the percentage of debt converted into equity
could increase to more than 40 percent in the near future
depending on the ability of the local debtors to service the
debt, and on their willingness to surrender a greater amount of
shares to their foreign creditors.
Ruru admitted that in some cases the local debtors,
particularly family-owned businesses, were unwilling to hand over
a large stake to the creditors.
"But there are already a couple of huge companies whose
founders effectively no longer have shares as a result of debt
restructuring," he said, pointing out as example that more than
95 percent of the shares in Bakrie & Brothers were no longer in
the hands of the Bakrie family, the founders of the diversified
business group.
The government set up the JITF in 1998 to help accelerate the
restructuring of the country's huge corporate debt, particularly
foreign debt. The task force plays a mediation role between
debtors and creditors. But debtors and creditors cannot be forced
to avail of the mediation facility provided by the JITF.
The International Monetary Fund and the government, however,
have set a certain debt restructuring target that must be met by
the JITF. The target is part of the economic reform program
sponsored by the IMF.
The task force had managed to restructure around US$10 billion
of corporate foreign debt by the end of December 2000, which was
in line with the target set by the IMF, and increased the value
of agreed restructurings to $11.88 billion by the end of April,
more or less equal to the $12 billion target.
Ruru said that there had been some 109 debt restructuring
schemes registered with the JITF involving an estimated debt of
around $19.26 billion, of which 53 accounted for a total debt of
$11.88 billion.
He said that the restructuring schemes registered with the
task force included debts owed by some 48 publicly listed
companies.
Ruru said that the government and the IMF had yet to decide on
a new restructuring target for the JITF.
But, he said that considering the current volatility of the
rupiah, domestic political instability and weak macro economic
conditions, the task force should not be saddled with an
unrealistic debt restructuring target.
"The volatility in the rupiah is discouraging debtors from
concluding restructuring deals," he explained.
Ruru said that the realistic amount of corporate debt that
could be restructured by the JITF during the remainder of the
year was around $3 billion.
He added that most of the restructuring schemes currently
being handled by the task force involved individual debt size of
around $150 million, compared to $500 million per case
previously.
"This means that we need to put in more man-hours just to meet
last year's target level," he said, pointing out that the man-
hours involved in the restructuring of a $500 million debt and a
$150 million debt were almost the same.
"But of course, we'll always do our best to meet the (new)
target set by the government and the IMF," he said. (rei)