RI, foreign banks agree on debt solution

JAKARTA (JP): The government and a group of 13 foreign banks announced in a joint statement released on Monday that they had reached an agreement on the terms to restructure the debts of cash-strapped Indonesian banks.

According to the statement, issued by Bank Indonesia, the "interbank debt exchange" agreement would cover Indonesian banks' foreign debts payable by Dec. 31, 2001.

The statement, however, did not specify the amount of debt covered. Observers familiar with the negotiations said the agreement covered about US$3.8 billion.

Bank Indonesia director Dono Iskandar Djojosubroto, who -- together with Radius Prawiro -- represented the government in negotiations with the foreign creditors, said the agreement would give local banks more breathing space in settling their foreign obligations and also support the government's bank restructuring program.

"The rollover of banking external debt ... should provide important support to Indonesia's long-term efforts to restructure the banking sector," Dono said in the statement.

Under the agreement, Indonesian banks, including their overseas branches and subsidiary banks, will swap loans maturing by Dec. 31, 2001, for an equal amount of new loans with terms of one to four years guaranteed by the central bank.

The new loans will mature in 2002, 2003, 2004 and 2005, with annual interest rates of 2.25 percent, 2.375 percent, 2.5 percent and 2.75 percent over the London Interbank Offered Rate (LIBOR), respectively.

New loans exchanged for debt originally scheduled to mature in 2000 and 2001 will be subject to interest at the above rates from June 1 in those years. Prior to these dates, they will be subject to interest at the rate of 1.25 percent over LIBOR.

Pending the completion of the exchange offer, the government will ask foreign creditors to roll over debt maturing through June 1, 1999 and adjust interest payment periods according to the newly agreed terms.

Short-term trade financing and new loans issued in the 1998 interbank exchange offer were not eligible for this year's exchange offer, the statement said.

Last year, about $2.7 billion worth of eligible interbank debt, including derivatives and contingent debt, maturing in the fiscal year ending March 31, 1999, was tendered for new loans guaranteed by Bank Indonesia.

Welcoming the agreement, the steering committee of 13 foreign banks said, "The agreement serves as a constructive basis for the resolution of Indonesia's banking external debt problems."

All of the 13 banks in the committee will participate in the interbank exchange offer, it added.

They are ABN-Amro Bank N.V., Bank of America NT & SA, Banque Nationale de Paris, The Bank of Tokyo-Mitsubishi Ltd., The Chase Manhattan Bank, Citibank N.A., Deutsche Bank AG, HSBC Holdings, The Korea Development Bank, Overseas-Chinese Banking Corporation, Sanwa Bank Ltd., Standard Chartered Bank and The Sumitomo Bank Ltd.

Dono said the exchange offer would strengthen Indonesia's balance of payments to enable the shaky banking industry to restructure loans to local private borrowers through acceptable commercial terms.

"This way, exchange offers will benefit both the banking sector and also the private sector as a whole," Dono said. (rid)