Nod likely for RI bank debt plan

Nod likely for RI bank debt plan

SINGAPORE (Dow Jones): At the end of a six-city roadshow to
sell the Frankfurt debt agreement to creditors, Indonesian
officials said yesterday the presentations received a "good
response" and an agreement on US$7 billion in bank debt should be
in place within a month.

But the officials gave little indication on whether a proposed
framework to roll over a more staggering US$60 billion in
corporate debt was also received favorably. This framework, the
Indonesia Debt Restructuring Agency (INDRA), was part of an
agreement with a steering committee of bankers reached in
Frankfurt in early June.

"The primary purpose of the roadshow has not been to discuss
INDRA," Mark Walker, an adviser to the Jakarta government, said
at a press conference following a presentation to bankers in
Singapore.

The debt agreement offers a voluntary program to debt-laden
companies under which their obligations will be extended by eight
years and under which they will receive access to dollars at a
locked-in rate. In return, they must resume making loan payments,
which almost all Indonesian companies have ceased doing.

Ahead of the roadshow, private bankers in Jakarta said the
Indonesian officials needed most to sell the plan for
restructuring corporate debt, while the banking-debt portion of
the Frankfurt agreement was less important.

"The principle purpose of our discussion has been to talk
about the two elements of the accord that are to be implemented
right away," Walker said yesterday, listing agreements on bank
debt and trade financing.

Asked after the press conference whether securing an agreement
on corporate debt was more vital to the program, Walker said,
"They're both important. They both have to be dealt with."

He added, "The banking system is important to the continued
viability of the private sector. The private sector needs credit
and credit comes from the banking system. You cannot look at the
private sector and say we'll just look at the private sector and
the banking sector is irrelevant. It's not."

Private sector

On the private sector side, we really haven't been talking
about commitment, so it's really not a question of asking people
to commit," Walker said.

The INDRA program is a voluntary framework and creditors and
debtors will still have to discuss the details of debt
restructuring among themselves.

"Of course, there is concern among the creditors about debt
forgiveness, but I have to say that of course there will have to
be debt forgiveness," he said. "In many cases, private sector
firms will not be able to repay debt at current levels."

The amount of debt write-offs would vary from case to case, he
said, with some companies not needing any debt forgiveness.

The press conference in Singapore followed a meeting with
about 200 bankers, mostly based in Singapore and Malaysia. In the
past week, the Indonesian officials have also presented their
case in New York, Frankfurt, Paris, Tokyo and Seoul.

"We have been delighted to see a very good response by the
creditor banks with regard to the schemes offered by the
Frankfurt agreement," Boediono, Indonesia state minister of
national development planning, told the press briefing.

Walker, who handled the bulk of the conference, said they
expect a proposal to exchange about US$7 billion in mostly short-
term debt owed by Indonesia banks for longer-term debt to be a
success.

Under the plan, the bank debt would be exchanged for one-,
two-, three- and four-year loan packages at rates of 275 basis
points above the London interbank offered rate (Libor) for one-
year debt with an additional 25 basis points for each additional
year.

About a third of the US$7 billion is owed by state-owned banks
and the remainder by private banks, Walker said.

The 13 members of the Indonesia's bank creditor steering
committee, including Chase of the U.S. and Germany's Deutsche
Bank, are expected to join the program, Walker said, adding this
represents a "significant portion" of the debt, but less than
half.

Bankers in Singapore expressed optimism on restructuring
private debt.

"My opinion is positive, and I think they are going to reach
their target," said Orazio Coco, Singapore branch marketing
manager for Italy's Banca di Roma, citing the plan to restructure
about US$7 billion in bank debt.

Coco and about 200 other bankers attended yesterday the final
meeting in a six-city roadshow held by Indonesian officials to
sell the Frankfurt agreement between creditors and Indonesian
debtors.

"Everybody is involved with the situation," Coco said as he
left the meeting, but he added, "I think most of the banks still
haven't decided."

Heikki Pero, head of corporate banking for the Singapore
branch of Finland's Merita Bank he generally views the plans
presented Wednesday as positive.

"The plan looks OK," he said. "It's the only plan that exists,
and (we) have to accept it."