RI debt problem will take a year to solve: Banks

RI debt problem will take a year to solve: Banks

SINGAPORE (Agencies): Indonesia's corporate debt problem would
take at least a year to solve and not all creditors will be
repaid, a spokesman for a committee of creditor banks said in
Singapore yesterday.

David Brougham, group executive director of Standard Chartered
Bank, said after a meeting between creditor banks and an
Indonesian committee that both sides had the appetite to solve
Indonesia's debt problem.

He added, however, that the debt package was not a safety net
and some Indonesian firms would have to close.

Earlier in the day, Indonesia proposed a voluntary and
temporary freeze on corporate debt servicing, effective
immediately, until borrowers and lenders could work out an
arrangement to resume debt payments.

Indonesia's total external dues stand at $140 billion and
analysts have said foreign corporate debt was virtually
impossible to pay, given the rupiah's 80-percent drop in value
since July.

Jakarta banking sources said the other foreign banks believed
to be involved in the Singapore talks were: ABN-AMRO for the
Netherlands, Citibank and Bank of America for the United States,
Deutsche Bank for Germany, Societe Generale for France, Bank of
Tokyo-Mitsubishi for Japan and Development Bank of Singapore and
United Overseas Bank for Singapore.

Financial analysts here said Indonesia's proposal to slap a
temporary and voluntary freeze on the servicing of corporate debt
is about as close to an outright moratorium as you can get.

But it is the use of the words "voluntary" and "proposed"
which distinguishes this version of the halting of repayments
from a full-scale debt moratorium.

But this is being viewed as the Asian version of moratorium.
"What is a 'voluntary framework' when you announce a debt
moratorium?" said Chiang Yao Chye, Head of Asia Pacific Research
at CIBC in Singapore. "To what extent is it voluntary?"

While the voluntary element exists and companies can still pay
back loans if they are able, Indonesia will continue to deny this
is in fact a moratorium, analysts said.

"We already had a moratorium in effect...what it does is get
us one step closer toward debt restructuring in as much as they
are trying to get a framework in place," said Andrew Fung,
Regional Treasury Economist at Standard Chartered in Singapore.

In Tokyo, Japan's finance ministry yesterday cautiously
supported Indonesia's plans to seek a "voluntary" moratorium of
tens of billions of U.S. dollars in foreign debt owed by the
embattled country's corporate sector.

"It is strictly on a voluntary, private-sector basis, and
future development will depend on how banks and other lenders
will react," an official at the ministry's development policy
division said.

"As the debt problem has drawn market attention, and that
proposal can be a starting point of discussions, we welcome it,"
he said.

Indonesia's private sector owes some US$67 billion overseas,
according to official estimates.

A foreign diplomatic source in Indonesia said private banks
accounted for $12 to $13 billion of the total and the remainder
was in corporate debt.