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."