RI, foreign banks to talk on debts
RI, foreign banks to talk on debts
NEW YORK (Dow Jones): Indonesia and foreign banks will meet
next week in London to negotiate the rescheduling of about US$4
billion in bank debt maturing between April 1, 1999, and Dec. 31,
2001.
Last year, financially strapped Indonesia and a committee
representing foreign creditors announced a plan to restructure
about $80 billion of foreign debt owed by Indonesian banks and
corporations.
As part of that deal, foreign creditors agreed to reschedule a
total of about $7 billion in foreign currency obligations owed by
Indonesian banks to give Jakarta some breathing room to make
needed financial reforms.
Last August, some $2.7 billion of eligible Indonesian bank
external debt, derivatives and contingent debt maturing in the
fiscal year ending March 31, 1999, was tendered for exchange into
new loans guaranteed by Bank Indonesia.
That bank debt was swapped for loans with maturities of one,
two, three and four years. The new loans were priced to yield
275, 300, 325 and 350 basis points over the London Interbank
Offered Rate, respectively.
Indonesia's efforts to restructure the debt owed by the
country's banks to foreign creditors may be complicated by
ongoing effort to reform and revitalize an Indonesian financial
sector weakened by non-performing loans, high interest rates and
a withering currency.
Pressured by the International Monetary Fund and the World
Bank, the government of President B.J. Habibie last weekend
closed 38 banks, took over seven and agreed to bail out nine more
banking institutions.
The IMF had frozen disbursement to Indonesia pending the
successful resolution of the bank closure issue. But clearing the
way for the resumption of much-needed loans, Indonesia signed a
new letter of intent with the IMF on Monday.
Promising to be a bone of contention at next week's meeting is
how the debt of banks closed recently would be treated under the
restructuring of the $4 billion in eligible bank debt coming due
through December, 2001.