Marubeni to reduce interest rate of Chandra Asri debt

JAKARTA (JP): Japan's Marubeni Corp. has agreed to lower the interest rate of the debt owed by the local petrochemical giant PT Chandra Asri, according to Coordinating Minister for the Economy Rizal Ramli.

Rizal said on Tuesday that the interest rate had been lowered to 1.5 percentage points above Libor (London Interbank Offering Rate) from the previous level of 2.5 percentage points.

"This should help Chandra Asri... to have a more sustainable cash flow," he told reporters following a meeting with Marubeni vice president Takeo Watanabe.

The government earlier demanded that Marubeni reduce the interest rate to as low as zero percent.

Rizal did not provide further explanation.

Chandra Asri owes around US$700 million to a foreign creditor consortium led by Marubeni. The company also owes around Rp 3 trillion to the Indonesian Bank Restructuring Agency (IBRA), which received the bad debt from ailing domestic banks.

The government has recently approved the debt restructuring of Chandra Asri under which IBRA would convert part of its loan into a 31 percent stake in the company, while Marubeni would convert part of its loans into a 20 percent equity.

Chandra Asri's founder Prajogo Pangestu would take the remaining stake in the company.

The government had earlier demanded that Marubeni lower the interest rate as part of the debt restructuring deal.

The government also asked Marubeni to extend the repayment period of the Chandra Asri debt to 15 years from 12 years, and demanded the foreign creditor to take a greater equity in Chandra Asri.

The government, via the Financial Sector Policy Committee (FSPC) which groups several senior economic ministers, has also demanded that Prajogo surrender more of his personal assets as part of the restructuring deal.

The FSPC last week rejected the assets surrendered by Prajogo saying that they were not acceptable to the criteria set by the committee.

The government has given Prajogo until Wednesday to surrender his assets.

The FSPC has the final say on the country's major bank and corporate restructuring program. (rei)