RI debt talks may be over this morning

RI debt talks may be over this morning

FRANKFURT (Agencies): Indonesia's chief negotiator in talks aimed at rescheduling the country's US$80 billion private sector debt said yesterday negotiations may be completed this morning.

Asked if he was confident that a deal would be reached with Indonesia's creditor banks, Radius Prawiro told Reuters: "We are working on it."

Asked if that deal could be reached on Wednesday, he said: "No, maybe tomorrow morning".

A source at Bank Indonesia said the international banking community would have reached a "satisfactory" conclusion on a possible restructuring of Indonesian corporate and public debt yesterday.

"We expect that the banking community will reach a consensus on which policy it will take in extending Indonesian debt," the source told Dow Jones Newswires.

Earlier, U.S. banking sources said they doubted that a major breakthrough was in sight, but added that reports that the talks may run through today could imply that the two sides were approaching a deal.

The Nikkei English news service cited yesterday's edition of the Nihon Keizai Shimbun newspaper as saying Indonesia's creditor banks had agreed to convert short-term loans to Indonesian banks to medium-term debt backed by the Indonesian government.

Nikkei also cited sources familiar with the talks as saying the two sides were close to a workout of Indonesian corporate debt, including repayment terms.

The report also said banks had agreed to guarantee letters of credit issued by Indonesian financial firms in order to facilitate international trade with Indonesia.

The debt talks, which began in Asia before moving to New York and then Frankfurt, were previously said to have been deadlocked as Indonesian banks rejected calls for concessions to foreign creditors, which include some Japanese, U.S. and European banks.

The least controversial element of the talks may be a decision by the global banks to continue trade credits to Indonesia, as the extension is favored by some Japanese and Singaporean creditors, the sources said.

But on the thornier issues of corporate debt, which was owed by thousands of Indonesian companies, a workout plan appeared to be still distant, the U.S. sources said.

Indonesia's Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said last week he hoped the Frankfurt meeting would "finalize the general understanding with the creditors."

A total of 13 banks are represented at the Frankfurt talks, including the three co-chairs of the steering committee, which are Deutsche, Bank of Tokyo-Mitsubishi Ltd. and Chase Manhattan Corp..

Radius is accompanied by central bank director Dono Iskandar; Glenn Jusuf, Finance Ministry director general for financial institutions, and Rino Effendi, an economist at state-owned Danareksa Sekuritas.

The meeting had originally been scheduled for May 26 in Frankfurt but was delayed because conditions for discussions were judged unfavorable in light of the political unrest in Indonesia at that time.

Since the delay was agreed, Indonesian president Soeharto has stepped down and handed over power to his protege B.J. Habibie.