S&P lowers Indonesia's debt ratings

S&P lowers Indonesia's debt ratings

Standard & Poor's has said it has downgraded Indonesia's long-
term foreign currency sovereign credit and senior unsecured debt
ratings to CCC from CCC+, due to concern over possible debt
rescheduling at next year's Paris Club meeting, as it would
threaten bond-holders.

The U.S.-based rating agency revised the outlook from stable
to negative.

The government had earlier said that it was seeking to
reschedule some US$2.7 billion in sovereign debt at the next
meeting of the Paris Club of creditor nations in February 2002.

But Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti was quoted on Monday by Kompas daily as saying that the
government was giving consideration to asking its official
creditors to convert debt into grants to help reduce the huge
foreign debt burden.

Dorodjatun said that the country's debt service ratio had
reached 40 percent of GDP, exceeding the level considered safe,
at about 25 percent.

S&P said that the Paris Club creditors were likely to insist
that commercial creditors provided debt relief comparable to what
they would offer.

The September 1998 and April 2000 Paris Club restructurings,
along with the $500 million 1995 standby loan and the $350
million 1994 standby loan, both with amortization payment due
next year, were especially at risk, S&P said.

"If Indonesia obtains even more generous official creditor
debt relief than its two previous reschedulings, other external
debt, including the US$400 million Yankee bond due in 2006, could
also be ensnared," it said. -- JP