Restructuring of largest debtors delayed
Restructuring of largest debtors delayed
JAKARTA (JP): The government will not be able to complete a
loan restructuring agreement with the 20 largest corporate
debtors of state banks by the April 30 deadline, as promised to
the IMF, chairman of the Jakarta Initiative taskforce Yusuf Anwar
said on Thursday.
But he expected the delay would not cause any interruption to
the disbursement of the IMF's bailout loan commitment to the
country.
"I think the International Monetary Fund will be reasonable
enough," Yusuf told reporters on the sidelines of a seminar on
debt restructuring organized by the Castle consulting group.
He declined to provide further details.
The seminar was attended by several debt restructuring experts
including Thomas Tan of Bank Bali, Aliza Knox of the Boston
Consulting Group, John Knight of Chase Manhattan Bank and Frank
Shea of Bank Danamon.
The government promised in the latest letter of intent to the
IMF that it would restructure 20 of the largest debts to state
banks by April 30.
The Indonesian Bank Restructuring Agency (IBRA) has assumed
over Rp 100 trillion in non-performing loans from the country's
seven state banks. The banks are: Bank Rakyat Indonesia, Bank
Dagang Negara, Bank Bumi Daya, Bank Negara Indonesia, Bank Ekspor
Impor Indonesia, Bank Tabungan Negara and Bank Pembangunan
Indonesia.
The loans are believed to have been given to companies owned
by the country's politically well-connected businesspeople,
including former president Soeharto's children and their cronies.
The companies include PT Chandra Asri Petrochemical Center,
car maker PT Timor Putra Nasional and cement maker PT Semen
Cibinong.
Analysts believe the delay in the loan restructuring measures
could further hurt the already low confidence in the economy, as
the international business community could see it as an
indication of a stalled economic reform program.
"The question now is whether the World Bank and the IMF will
continue pouring in their money as scheduled," said Rino Agung
Effendi, an adviser to the Indonesian Debt Restructuring Agency
(INDRA).
Rino admitted that the debt restructuring of the country's
corporate sector has been slower than initially anticipated.
He explained that the debt restructuring was complicated
because of the large amount of debt and the great numbers of
debtors and creditors.
"They have various different interests and conditions, making
it more difficult to encourage them to sit at one table," Rino
said of the parties involved in the restructuring process.
Minister of Finance Bambang Subianto has turned down demands
to convert the non-performing corporate loans with negative
cashflow into government equity.
State banks also rejected proposals for a debt reduction,
unless the debtors could pay back the debts with a single
payment.
The government has repeatedly said that debtors who cannot
reach an agreement will be liquidated.
But a government source said it would be problematic for the
government to foreclose on the assets of debtors, because their
value is in most cases lower than the loans themselves.
"The government is pushing hard to persuade the debtors to
surrender their valuable assets, many of which are overseas
assets," he said.
However, Rino said there are now indications that both debtors
and creditors have begun to realize that postponing the
restructuring program will cost them more.
He pointed out that there are now more indebted companies
requesting that the Jakarta Initiative facilitate negotiations
with their creditors.
He suggested that the government provide incentives for both
debtors and creditors to work out debt restructuring agreements.
He added that a decline in domestic interest rates was also a
key factor.
Indonesia has about US$80 billion in corporate foreign debt,
and about Rp 600 trillion in local currency debt.
The debt restructuring deal is essential for the country to
recover economically. (rei)