RI and creditors set resolution framework
RI and creditors set resolution framework
NEW YORK (Agencies): Creditor banks and Indonesia agreed Thursday on a broad set of principles to provide a framework for bilateral negotiation on the country's private external debts.
According to a joint statement, the 13-member bank committee and a senior Indonesian delegation agreed to a framework "inspired by Mexico's Ficorca program."
The principles agreed to "are intended to provide private sector debtors with protection against exchange-rate risks and to assure debtors and creditors of the availability of foreign exchange needed to service restructured debt of the private sector."
Participation in the program will be voluntary and will require the consent of both the debtor and its creditors.
Both parties acknowledged the process remained in its infancy. Bankers said they want proof Indonesia is complying with terms of its recent agreement with the International Monetary Fund (IMF) before they will sign off on any plan.
"We would insist that they are in compliance with the IMF program before we agree to any debt restructuring," one banking source close to the proceedings said.
According to the statement, both debtors and creditors will be free "to make whatever other arrangements they agree upon, either in conjunction with or in lieu of participation in the program."
Both parties acknowledged the process remained in its infancy. Bankers said they want proof Indonesia is complying with terms of its recent agreement with the International Monetary Fund (IMF) before they will sign off on any plan.
"We would insist that they are in compliance with the IMF program before we agree to any debt restructuring," one banking source close to the proceedings said.
Before developing specific terms of restructuring, lenders said they wanted a more thorough examination of the country's economic health and a breakdown of the corporations' debt loads.
The request for detailed information posed a challenge for the Indonesians, Radius Prawiro, the chief Indonesian negotiator said.
"We must go back and come up with all the data they have asked for," Radius said when asked what roadblocks the negotiators must clear.
This involves both economic and financial data, he said, such as Indonesia's current account balance and details of the "about $68 billion in private-sector corporate debt."
Radius also said there were several billion dollars ($12.46 billion, according to the latest official data released in Jakarta) more corporate debt which was owed by companies controlled by the government.
Indonesia's legal counsel, Mark Walker of law firm Cleary Gottleib, said leaving the meeting, "We wanted to put forward a conceptual approach and we had a very good two-day discussion on the approach."
Walker declined to comment on what level of foreign-exchange insurance the country would provide.
"It will be a formula," he said, adding that the funds to finance such a program could come either from the International Monetary Fund, the World Bank, the G-7 countries or Japan.
"We did not discuss any grace period for the repayment of the debt," Radius said. "Of course, we are prepared to be flexible."
Radius added that the talks did neither discuss any exchange rate that would be desirable for the debt restructuring plan.
Walker said Indonesia would like to start the program in the second half of 1998. He also said that the next meeting between Indonesia and the bank steering committee in early May could take place in Tokyo.
According to the statement, working bank subcommittees were formed to deal with specific aspects of Indonesia's external debt and will begin meeting immediately.
The statement said that in addition to private external debt, ongoing meetings will also "address measures related to Indonesia's access to trade finance and interbank lines, including the clearing up of payment arrears."
The bank steering committee is co-chaired by Chase Manhattan Bank, Deutsche Bank AG and Bank of Tokyo-Mitsubishi. Other members of the steering committee are ABN Amro, Bank of America, Banque Nationale de Paris, Citibank NA, HSBC Holdings, the Korea Development Bank, Oversea Chinese Banking Corporation, Sanwa Bank, Standard Chartered and Sumitomo Bank.
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