RI private debt to be rescheduled
RI private debt to be rescheduled
TOKYO (Agencies): Leading banks from Europe, Japan and the United States are likely to agree on a plan to reschedule repayments of principal on loans made to Indonesia's private- sector companies, the Japanese daily Nihon Keizai Shimbun reported in yesterday's evening edition.
Under the plan, originally crafted by Standard Chartered Bank, Indonesian firms would be allowed to postpone repayment of principal for six months, but they would still be required to continue interest payments, the paper said, quoting financial sources.
The plan would allow creditor banks to demand compensation from Bank Indonesia, the central bank, in the event that borrower firms failed to meet interest payment obligations, the paper said.
It said an agreement on the plan might be reached as early as yesterday in a meeting of 13 creditor banks, including Bank of Tokyo-Mitsubishi (BTM), Sumitomo Bank, Sanwa Bank, Standard Chartered Bank, Citibank, Deutsche Bank and ABN AMRO.
The plan is also expected to include a proposal to create a currency stabilization fund to provide funds to Indonesian firms in foreign currencies, the paper said.
The plan, once adopted by the creditor bank group, would be proposed to the Indonesian government, the paper said. But it remained uncertain whether Jakarta would accept the plan, the sources told the paper.
Japan's Fuji Bank Ltd. is also considering writing off non- performing loans to Indonesia and other developing Asian countries, a spokesman said yesterday.
"We cannot say how much, but are prepared to use adequate reserves" to write off the loans, the spokesman said.
The Nihon Keizai said the major commercial bank was expected to write off for the year to March a maximum 100 billion yen ($768 million) of its Asian loans, which now total 500-to-600 billion yen.
The Indonesian government is expected to formally present a private-sector debt workout plan to foreign creditor banks next week after finalizing details in consultations with the International Monetary Fund.
A western financial expert close to the Indonesian government told Dow Jones on condition of anonymity Tuesday that details of the debt proposal will be completed "within the next week" and will be presented to creditors when the IMF and the Indonesian government reach an accord over fresh economic goals under a $10.1 billion standby credit arrangement.
"The final details will still have to be worked out after next week with the banks," the financial expert said, explaining that "they'll be on a case by case basis. But by next week there will be a proposal from the government ready. It's still being finalized."
He confirmed that the Soeharto government is looking at modeling the restructuring of about $74 billion in short-term debts owed by private Indonesian concerns along the lines of a program instituted in Mexico in the early 1980s.
The plan would include a foreign exchange facility to provide local companies with liquidity to meet their foreign borrowing obligations and a scheme to roll over Indonesian debt by between two to three years.
The Mexico program involved the creation of what was known as the 'Trust for Coverage of Exchange Risk' by the government. And a similar mechanism, according to the financial expert, could evolve in Indonesia so that private concerns would have access to dollars to meet debt repayments.
Under the Mexico model, debtors would agree to repay creditors in dollars, or other foreign exchange, at a future date. However, interest would be paid through a rupiah-denominated instrument, according to the model.
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