Marubeni Corp. insists on old Chandra Asri debt restructure plan
Marubeni Corp. insists on old Chandra Asri debt restructure plan
JAKARTA (JP): Japan's Marubeni Corp. has insisted the
government honor the old debt restructuring agreement with
petrochemical giant PT Chandra Asri, according to Chairman of the
Indonesian Bank Restructuring Agency (IBRA) Edwin Gerungan.
Edwin said here on Thursday that IBRA had proposed a new debt
restructuring plan which included a lower interest rate, longer
maturity period, and greater equity participation in Chandra Asri
by the Japanese lender.
"But they still demand the old MoU ... It's a tough
(negotiation)," he told reporters, referring to the Memorandum of
Understanding reached by the government and Marubeni in June
2000.
"But we'll continue to negotiate ... We don't want to return
to the old MoU," he added.
IBRA resumed negotiation with Marubeni earlier this week.
Chandra Asri owes around US$700 million in debt to a foreign
consortium led by Marubeni. The petrochemical firm also owes
around Rp 3 trillion to IBRA.
Under the existing MoU, Marubeni would convert around $100
million of its loan into equity in Chandra Asri, while the
government via IBRA would convert the local debt into an 80
percent equity.
Marubeni also agreed to give Chandra Asri 12 years to repay
the foreign debt with an interest rate of 2.5 percentage points
above Libor (London Interbank Offering Rate).
But the Financial Sector Policy Committee (FSPC), which
oversees major corporate restructuring in the country, changed
its mind following criticism that the government was exposed to
covering future liabilities of Chandra Asri with its majority
ownership in the company.
The FSPC, which groups several senior economic ministers,
managed to force Chandra Asri founder Prajogo Pangestu to
surrender personal assets as part of a new restructuring plan for
the local debt. Under the new plan, Prajogo would have a 49
percent stake in Chandra Asri, while IBRA would have a 31 percent
stake.
Prajogo has surrendered ownership in some 20 companies to
IBRA, but ownership in three companies, including pulp producer
PT Tanjung Enim Lestari, timber company PT Musi Hutan Persada,
and publicly-listed timber giant PT Barito Pacific has been
pledged to other foreign creditors by Prajogo.
After due diligence, the FSPC finally agreed to a second
mortgage on the three assets, whereby the remaining proceeds from
the sale of the assets would be pledged to IBRA.
After reaching a new agreement with Prajogo, FSPC then pushed
IBRA to seek a new agreement with Marubeni.
The June MoU expired at the end of last year. But in November,
Marubeni expressed agreement to lower the interest rate of the
Chandra Asri foreign debt to 1.5 percentage points above Libor.
However, the government still insists on a rate equal to
Libor.
The government has also demanded Marubeni take a greater
equity position in Chandra Asri, currently operating in the red.
Chandra Asri has been a controversial company since
construction started on its petrochemical plant in the early
1990s.
Chandra Asri founders, which include a son of former president
Soeharto, somehow managed to convince state-owned banks to
finance the project, located in West Java's Cilegon industrial
city, without proper analyses of the business plan.
Several Japanese lenders including Bank of Tokyo-Mitsubishi,
Fuji Bank and JICA joined Marubeni to help finance the project.
But the Asian financial crisis that started in the middle of
1997 catapulted Chandra Asri into deep financial trouble.(rei)