Freeze Seen As A Reality Statement

Indonesias announcement of a temporary freeze on servicing its mountain of corporate debt yesterday only formalised what companies had already been doing, economic analysts said. "Technically, a number of companies were involved in a debt moratorium anyway, given theyd ceased servicing their debt," said Callum Henderson, managing analyst at MMS International in Hong Kong.

Indonesias corporate debt has been estimated at least $66 bn although some analysts said it could be as high as $80 bn. The announcement was made by Radius Prawiro, former cabinet minister appointed by Suharto to manage corporate debt. He said the freeze on servicing did not amount to a moratorium, although analysts questioned his interpretation. "It's as Latin America as Latin America can be without being in Latin America," one analyst said, referring to the failure of countries there to meet financial obligations in the 1980s.

 

Others said, an effective moratorium was already in place because corporate Indonesia was already in default on many of its loans. "We already had a moratorium in effect, what it does is get us one step closer towards debt restructuring in as much as they are trying to get a framework in place," said Andrew Fung, Regional Treasury Economist at Standard Chartered in Singapore. (Reuters)