Tom Wright, Jakarta – Indonesia's independent debt restructuring review body issued a report late Thursday criticizing key deals which it said favored debtors over the government. The International Monetary Fund, which is visiting Indonesia this week, has said it will only resume lending under a stalled $5 billion program if the government first made the report public.
The IMF suspended its program in December, in part because of concerns Indonesia was giving politically connected debtors deals that allowed them to keep control of their companies, while putting most the costs of restructuring on the government. The Indonesian Bank Restructuring Agency, or IBRA, took over about 300 trillion rupiah in bad debt following a banking sector collapse four years ago, and is under huge pressure to recover cash to help reduce pressure on state finances.
In the review, the government's Oversight Committee – an independent body set up by the government to review IBRA deals – criticized a number of outline debt restructuring pacts for leaving IBRA with short change. The review heavily criticized a deal between IBRA and Chandra Asri, a joint-venture petrochemical company owned partly by a consortium led by Japan's Marubeni Corp. (J.MRB). Under the deal, Chandra Asri would repay the Japanese creditors under Marubeni $623.6 million over 12 years at the London Interbank Offered Rate plus 2.5%. Japanese creditors would convert $100 million for a 20% stake in Chandra Asri.
IBRA would get back only $50 million of the Chandra Asri loans it took over from the banking sector, while converting a huge $463.6 million in debt for an 80% stake in the company, the review said. "Looking at it form a purely commercial point of view, the restructuring is clearly disadvantageous to IBRA and advantageous to Marubeni (representing the Japanese lenders)," the report said.
The Oversight Committee also criticized a related debt restructuring deal with Prjaogo Pangestu, the millionaire former head of Chandra Asri.
The head of the committee, Mari'e Mohammad, was quoted by local media Friday as saying it will soon publish other reviews of debt restructuring deals.
The latest review doesn't cover the Texmaco Group's controversial debt restructuring agreement, which drew flack for putting a huge burden on IBRA while allowing founding shareholders to keep control of the company.
Texmaco, with IDR17 trillion in debt to IBRA, is the agency's largest single debtor.