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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Thomas Haegin who wrote (4211)	6/5/1998 5:37:00 AM
From: Thomas Haegin	Respond to of 9980

Repost: Analyst/investor comments on Indonesia debt deal Reuters Story - June 04, 1998 14:54 ÿÿÿ LONDON, June 4 (Reuters) - Indonesia reached agreement on Thursday with international banks on the rescheduling of its external debt. ÿÿ The rescheduling programme comprises three initiatives relating to private sector corporate debt, external credit to the Indonesian banking system and trade finance. ÿÿ Analysts' and investors' reactions to the deal follow. ÿÿÿ ASHOK SHAH, SENIOR PORTFOLIO MANAGER, OLD MUTUAL ASSET MANAGEMENT, LONDON ÿÿÿ "Things are so bad now with non-payment of interest that even this programme is just a small part of a large programme that is needed. On its own it won't be enough. For Indonesia as a country and Indonesian companies, their ability to repay debt will be damaged for some time." ÿÿ "The numbers of debt outstanding are changing all the time, some of the banks have lied about it, they overvalued their assets by one-third. A lot still needs to come out of the woodwork." ÿÿ "It's very very positive that they've started (dealing with their debt problems) but they have a long way to go. Things were so deplorable that without help the whole thing would have imploded. I say well done but we need a lot more." ÿÿÿ JEROME BOOTH, HEAD OF EMERGING MARKET RESEARCH AT ANZ INVESTMENT BANK, LONDON ÿÿÿ "I think it is very positive. I would expect this to actually boost the market over time. Clearly, it signals that we could get further deals on corporate debt and basically it is good news. I don't think it's fully been reflected so far in the prices. The main focus now has got to be to see the debt restructuring in not just the banks but also with the corporates come to a conclusion and we have to see the Indonesians co-operating fully with the IMF." ÿÿÿ PHILIP EHRMANN, GARTMORE INVESTMENT MANAGEMENT, LONDON ÿÿÿ "Its progress of a sort, but we'll have to watch this space...The devil is in the detail." ÿÿ "We had heard that it might be an eight year programme so obviously four is probably better. But I think that just the fact that they are attempting to sort out this problem is progress, but there still is a long way to go." ÿÿÿ SANJIT MAITRA, HEAD OF ECONOMICS AND STRATEGY, WEST LB, LONDON ÿÿÿ "It is certainly encouraging news and will help to resolve one of the most pressing issue in the region. It's a helpful sign in the right direction but it's not sufficient because of all the structural problems that remain." ÿÿÿ ANDY TAN, GENERAL MANAGER OF STANDARD & POORS/MMS, SINGAPORE: ÿÿÿ "It is a very important development. My personal feeling is that the debt restructuring issue should have been settled, it should have been on the priority list. Right now there is some progress here and that's a good sign. It's a step in the right direction but we are not expecting a dramatic pick-up in terms of sentiment. Too much water has passed under the bridge and it will take a while for confidence to return." ÿÿÿ On terms of the loans, at margins over LIBOR: "I don't think you can consider it to be unreasonable because there is a high risk premium attached to the loan. It's fair pricing." ÿÿÿ BRUCE GALE, ANALYST WITH POLITICAL AND ECONOMIC RISK CONSULTANCY LTD, SINGAPORE: ÿÿÿ "This agreement is helping Indonesia to hold together some of its (problems) which is a good thing, but on the other hand you've got a move against Suharto's business interests which has the potential to damage the economy from another directon. And you have the government itself running out of money. There probably has to be some government talks with the banks on their position." ÿÿÿ "The political situation is not stable. We could very well find ourselves with hyper-inflation, so this is not a formula for political stability. There are many ways this agreement could be overtaken by events in the next few months, just in the same way as the IMF agreements were overtaken by events." ÿÿÿ WILLIAM KEELING, HEAD OF RESEARCH, DRESDNER-KLEINWORT BENSON, JAKARTA ÿÿÿ "The conditions of the restructuring package are as much predicated upon the need of international banks to provision these losses over an eight-year period as they are in any belief that Indonesian corporates are going to be able to service these loans or repay them. ÿÿÿ "It provdes some relief to the cash flow of major Indonesian companies. But many, many companies will simply be unable to service the interest requirement let alone the ability to repay principal. Therefore, it relieves the situation but doesn't remove the burden, which must be regarded as fair. ÿÿÿ "The most important implications are not for Indonesia but what this means to the quality of loans outstanding and how this is perceived by banks that have exposure to countries with similar risk characteristics. We need to look at China and Russia and Eastern Europe. For those countries, both the cost and accessibility of new credits from international banks has to be open to question." ÿÿÿ HARUN HAJADI, PRESIDENT DIRECTOR OF CIPUTRA DEVELOPMENT , INDONESIAN PROPERTY COMPANY, JAKARTA ÿÿÿ "The next three years will still be difficult because of the magnitude of the current crisis. But two years after that would likely be a recovery period. So we need at least five years. With a period of eight years, companies should be able to survive. ÿÿÿ "But I had hoped the deal would provide the best real average market rate of six month not 20-days. ÿÿÿ SETYAWAN SULISTIYONO, SPOKESMAN FOR INDONESIAN TELECOMMUNICATIONS GIANT TELKOM , JAKARTA ÿÿÿ "I hope the debt roll over may help Telkom's partners under the joint-operation KSO scheme which have suffered from large forex losses. ÿÿÿ "Actually the debt roll over doesn't have direct impact for Telkom because most of the loans obtained by the company were two-step loans," the official said. He said Telkom received foreign loans through the government and the state bore the burden on forex losses. REUTERS <eom>

To: Thomas Haegin who wrote (4211)	6/5/1998 5:38:00 AM
From: Thomas Haegin	Respond to of 9980

Repost: Malaysian debt agency needs $6.3 billion Reuters Story - June 04, 1998 09:09 ÿÿÿ By Azhar Sukri ÿÿÿ KUALA LUMPUR, June 4 (Reuters) - Malaysia's Asset Management Company, a new government-backed agency to buy up bad loans in the banking system, will need around 25 billion ringgit ($6.3 billion) in funds, Deputy Prime Minister Anwar Ibrahim said on Thursday. ÿÿÿ He said the agency, formed last month, will initially raise 10 billion ringgit through an international and domestic bond issue. ÿÿÿ Between $1 billion and $2 billion will be raised from the international market in the form of a government-guaranteed bond issue, and the rest will be raised in the domestic market, he told a news conference. ÿÿÿ Anwar, who is also finance minister, said U.S.-based J.P. Morgan and Co Incÿ and Arthur Andersen had been appointed as financial advisers. ÿÿÿ He said the private sector, including foreign investors, would increase their involvement in the agency over time. ÿÿÿ Despite assurances by Anwar that the AMC will operate in a transparent and market-driven manner and involve eminent financial companies, analysts expressed mixed reactions to the first details of its funding. ÿÿÿ "I'm quite sceptical of the whole thing. When Indonesia tried it, it didn't work. I think most people are still concerned that it's aimed at bailing out certain companies," said Sim Hwee San, economist at Skandinaviska Enskilda Banken in Singapore. ÿÿÿ "I think the $1 to $2 billion international bond issue should not be too difficult to raise, but the local one could be a bit harder since people don't have that kind of money any more." ÿÿÿ "It basically involves the shifting of assets from one pocket to another, so the net effect would be neutral," said Amin Manap, banking analyst at Mohaiyani Securities. ÿÿÿ "The AMC will not change the overall picture of the economy." ÿÿÿ Since the financial crisis erupted last year, Malaysia has seen its currency and share prices plummet. ÿÿÿ The economy shrank by 1.8 percent in the first quarter of 1998, and non-performing loans as a share of total loans rose to 10.6 percent at the end of April from 6.7 percent at the end of 1997. Inflation has risen sharply. ÿÿÿ The agency, which will receive a 50 million ringgit start-up grant from the government, will buy up non-performing loans from banks and finance companies, shoring up their balance sheets and enabling them to make new loans. ÿÿÿ Anwar said the AMC had not yet identified any projects for funding. The agency is expected to take over the first non-performing loans by the end of July, he said. ÿÿÿ The central bank, Bank Negara, will help create the agency's policies to ensure its integrity, he said. ÿÿÿ "The agency will operate within market principles," Anwar said. Due diligence will be performed before the agency buys non-performing loans or other assets from financial institutions, ensuring that the price is set at a fair value. ÿÿÿ Industry sources said the AMC was expected to bundle the non-performing loans and resell them as securities. ÿÿÿ "The methods of ultimate realisation of value from the agency's assets must be responsive to market demand," Anwar said. ÿÿÿ Joanne Fong, economist at PhileoAllied Securities, said: "Hopefully the bond issue will be successful. It would be a great setback to Malaysia if it wasn't. It is vital that the international bonds are successfully taken up." ÿÿÿ "I would think the bonds would be pretty long-term with maturities of five, 10 and 15 years. I think between 200 and 300 basis points above KLIBOR would be about reasonable," she said. ÿÿÿ Prime Minister Mahathir Mohamad said on Wednesday the government would take up around 60 percent of the AMC. But Anwar said on Thursday it could eventually be a lot less. ÿÿÿ Ultimately, the agency will be wound up, sold to specialist investors or floated on an exchange as a specialist asset management business, Anwar said. ($1=3.95 ringgit) <eom>