RI starts marketing debt exchange program

RI starts marketing debt exchange program

NEW YORK (Dow Jones): Indonesia will begin marketing to foreign banks a program to exchange between US$8 billion and $10 billion in debt contracted by the country's banks into new loans in early July, a source familiar with the plan said Thursday.

The program, part of a wide-ranging agreement etched through a series of meetings in New York, Tokyo and Frankfurt earlier this year, aims at lightening the weight of foreign debt crushing Indonesia and Indonesian private companies.

Under the plan, the creditors of Indonesian banks will have the option of rolling over existing credits into new loans with maturities of one, two, three and four years baring respective yields of 2.75 percent, 3 percent, 3.25 percent and 3.5 percent.

The new loans will be guaranteed by the country's central bank, Bank Indonesia.

The roadshow to market this exchange offer to foreign banks will visit several cities, including Paris, New York, London, Tokyo and Frankfurt, the source said.

In addition to the exchange program for the bank debt, Indonesia's debt restructuring deal, reached in Frankfurt in early June, also include a plan to maintain existing trade financing arrangements.

According to the source, a prospectus to formally launch the trade finance program was sent to Indonesia's creditors Thursday. That program covers between $4.2 billion and $4.4 billion in debt.

Before launching both the bank debt exchange program and the rollover of trade finance plan, Indonesia needs to pay up to $1 billion in arrears due on the debt.

According to the source, payment of arrears to foreign banks have already begun. Foreign banks involved in the restructuring of Indonesian debt weren't immediately available to comment on whether they have began receiving payments.