Debt plagues Indonesia
Moratorium feared as Jakarta companies
seem unable to repay
Jakarta jangles Asia nerves - Jan. 9, 1997
January 9, 1998: 7:43 a.m. ET
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JAKARTA (Reuters) - A huge majority of
Indonesia's listed companies are unable to repay
overseas debt and are technically bankrupt unless the
rupiah stages a dramatic rebound, economic analysts
said on Friday.
Mohammad Syahrial, the head of research for
Pentasena Securities, said that only 22 of the 282
companies listed on the Jakarta Stock Exchange
were financially viable.
"The formula that I am using is current assets
minus total liabilities," he said. "Only 22 companies
are in a net surplus, the rest are technically bankrupt."
He said these 22 included satellite operator
Indosat, mining company Tambang Timah, tobacco
companies Gudang Garam and H.M. Sampoerna,
retailers Ramayana and Matahari, Bank Negara
Indonesia and Bank Internasional Indonesia.
Other major companies on his list were timber
firm Barito Pacific, Dankos Laboratories, Modern
Photo and toll-road operator Citra Marga, which is
controlled by President Suharto's eldest daughter Siti
Hardianti Rukmana.
Syahrial said he was calculating overseas liabilities
using a rate of 10,000 rupiah to the U.S. dollar,
which prevailed on Thursday evening.
The rate improved to about 8,000 by midday on
Friday, but other analysts said the estimated $65.6
billion in corporate debt was in any case a virtually
insurmountable problem.
The debt has accumulated over the years as
Indonesian companies sought cheap overseas funding
to back growth. With the rupiah depreciating at a
controlled five percent per annum, it was a safe bet.
But Bank Indonesia, the central bank, floated the
rupiah in August as Asian currencies came under
attack and the rupiah has fallen precipitously from a
level of about 2,400 to the dollar.
"Indonesian corporates actually decided at about
the 7,000-8,000 level that they were unable to repay
debt," said David Chang, head of research at
Trimegah Securities brokerage.
"They said: 'If you ask me to pay I'll go bankrupt.'
They have postponed payments and the banks had
virtually no choice but to roll over their debt."
While that does not amount to a moratorium on
debt payments, other analysts said the dreaded "M"
word was a possibility in Indonesia's case.
"At this juncture, the risk of debt moratorium is
very high," said Daniel Lian, head of Asian Markets
Research at ANZ in Singapore. "At this sort of
exchange rate, there is no guarantee corporates will
honor their overseas liabilities.
President Suharto said in a budget speech on
Tuesday that Indonesia would honor its debt
commitments and there was no word that the
government was considering a moratorium.
Analysts estimate total overseas debt is $133
billion, including $52.4 billion in sovereign debt and
$65.6 billion in corporate borrowings.
In the corporate sector, property companies were
the worst hit by the debt overhang.
The Jakarta Post quoted property analyst
Panangian Simanungkalit as saying all 23 real estate
firms listed on the exchange were technically
bankrupt.
He said the firms had combined overseas debt of
$3.4 billion, while their combined assets, at the
current exchange rate, were worth only $1.7 billion.
"So at the current rate of 10,000 rupiah to the
dollar, all listed (property) companies have
technically and fundamentally gone bust," he was
quoted as saying |
