Marubeni waives Chandra Asri's debt

Marubeni waives Chandra Asri's debt

TOKYO (Nikkei): Marubeni Corp. will waive about US$100 million in debt in return for shares in PT Chandra Asri, a petrochemicals joint venture with the Indonesian government, the Nihon Keizai Shimbun reported in its Wednesday evening edition, citing sources with the trading house.

Marubeni hopes the debt-for-equity swap will help the ailing Indonesian firm to turn around operations. The trading house owns a 21.2 percent stake in Chandra Asri with most of the remainder held by the Indonesian government.

Indonesia's largest petrochemicals producer owes $700 million to Marubeni. The Indonesian government is also expected to waive debt worth $400-500 million in return for an equivalent amount in shares, the sources said.

The firm's capital will be subsequently reduced to wipe out the remainder of Chandra Asri's $700 million in cumulative losses, the newspaper said.

There has been fierce wrangling between Marubeni and Jakarta over how the costs of turning Chandra Asri around should be shared.

Chandra Asri is capitalized at $1.05 billion and operates a plant that can produce up to 510,000 metric tons of ethylene annually. The company's annual losses once topped $100 million due to high production costs and a drop in ethylene prices.

The government aims to sell part of its stake in the company to oil giant BP Amoco PLC.

Marubeni, which earlier set aside Y30-40 billion in reserves to cover any loan loss involving the Indonesian joint venture, believes the rescue agreement will not affect its overall earnings.