Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Joey Two-Cents who wrote (7752)	4/23/1998 11:10:00 PM
From: Lazlo Pierce	Read Replies (1) \| Respond to of 18691

JTC, This is up your alley. Old news, but.... ********************************************** Banks may lose $56 billion in Indonesia loans BLOOMBERG NEWS April 23, 1998 JAKARTA -- Chase Manhattan Corp., Deutsche Bank AG, Bank of Tokyo-Mitsubishi and other banks may be forced to write off as much as $56 billion of loans to Indonesian companies, or 70 percent of what they're owed, fund managers and analysts said yesterday. A recovery of "30 cents on the dollar is very optimistic," said Ascanio Martinotti, a managing director for Hong Kong-based Regent Pacific Group Ltd., which manages about $2.5 billion. As banks and companies prepare to meet in Tokyo May 8 to follow up on talks last week in New York, Indonesian debtors say they can't repay their $80.2 billion of foreign debt in full because of the 69 percent plunge in the rupiah against the dollar in the past year. Indonesian tycoon Aburizal Bakrie, whose family companies owe more than a $1 billion, has called for 40 percent of foreign debt to be forgiven. Write-offs that size would hammer profits at banks that have already been hurt by slowing growth, weakening currencies and mounting defaults across Asia. Chase said Tuesday that its bad loans in Asia tripled in the first quarter from the end of the year to $243 million. Granted, estimates of debt write-offs are just that: estimates. Thirteen banks agreed in New York not to discuss terms of their agreement, saying it was too early. Still, whatever the final figure, industry analysts believe banks are likely to lose billions of dollars. They have little choice because of Indonesia's lax bankruptcy laws and legal infrastructure. No Indonesian company has filed for bankruptcy since the August devaluation of the rupiah, even though almost all publicly traded companies in the country are technically insolvent. Soaring interest rates are eating into companies' profits by weakening demand for products from cars and property to even noodles. Tuesday, key interest rates were raised to as much as 50 percent, risking a deepening recession to bolster the currency and rein in runaway inflation. After months of fruitless talks, optimism was high that progress on debt talks would be made in New York. Those hopes were dashed when a statement at the end of the talks said all sides agreed to "a broad set of principles to provide a framework for bilateral negotiations." It gave no specifics. "It doesn't mean a thing," Martinotti said. The International Monetary Fund and Indonesia had already said they were looking at a solution modeled on the "Ficorca." That was a plan used by Mexico to address private debt in the early 1980s, in which the government provided a subsidized exchange rate for foreign debt payments. Indonesia has indicated that that rate will be around 5,000 rupiah. The currency closed yesterday at 7,900 rupiah to the dollar. "It's just shifting the responsibility to the public sector from the private sector," and could push the government to "print money" to help repay the debt, Martinotti said. Expectations that a government guarantee will soon be provided could be undermining the chances that even solvent Indonesian companies will pay their debts. "If I'm a businessman and I'm looking around at everyone else in the country defaulting, and I know there's very little legal recourse for the banks when I don't pay them, I don't pay a penalty for choosing to default," said Vivek Gandhi, who helps manage about $1 billion in the region for Aberdeen Asset Management Asia Ltd. "I'm going to hold out for the exchange rate at 5,000." Gandhi said bankers are reluctant to cut a deal with any of their borrowers for fear of setting a precedent. "If I take a 40 percent haircut with one guy, that's automatically going to be the minimum everybody else is going to expect," he said. "No one wants to set that precedent." Though Indonesia has promised to revise its bankruptcy code by the end of the month, the new law will still be administered by the nation's court system, leaving the implementation of the laws in question. Indonesia is consistently ranked by businessmen as the most corrupt country in Asia.