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.