Asian 1997 Financial Crisis: debt restructuring - Indonesia

Themes: Economic Growth | Environmental Sustainability | Private Sector Development

Guinness Gallagher fielded a team of legal, banking, forestry operational and marketing experts to prepare a debt analysis and recovery plan for a failing forestry group, following the 1997 Asian financial crisis.

The intervention of our specialist team was sanctioned under the auspices of the Indonesian Bank Restructuring Agency (IBRA) in Indonesian titled the Badan Penyehatan perbankan Nasional (BPPN). IBRA was set up as part of a series of strategic policies taken by the Indonesian government in response to the banking and economic crisis which befell the country following the onset of the Asian monetary crisis in mid-1997.

Among other things, the drastic depreciation of the Indonesian Rupiah reduced bank liquidity, and loss of public confidence to the Rupiah and the banking system in general. As a measure to cope with the scarcity of liquidity in the nation's banking system, Bank Indonesia, as a lender of the last resort, provided liquidity assistance loans to banks. In addition, the government instituted a blanket guarantee program for all bank liabilities, in order to arrest further erosion of confidence towards the system. In order to participate in this scheme, the shareholders and lenders needed to engage an IBRA approved consultancy group, such as Guinness Gallagher.

Our IBRA sanctioned review involved:

  • Auditing the logging and transportation plans of the forestry company;
  • Reviewing the management capability; and
  • Analyzing and commenting on the existing and re-worked financial projections.

Our multi-disciplined team then provided advice to the Indonesian Bank Restructuring Agency, and the debt and equity providers as to the optimum debt and equity restructuring plans and possible operational models going forward.

The themes and sectors covered by this project were as follows: -

Theme Sub-Theme
Economic Growth - Developing rural areas
  - Promoting economic efficiency and enabling business environment
  - Promoting macroeconomic stability
  - Widening access to markets and economic activities
Environmental Sustainability - Global and regional trans-boundary environmental issues
Private Sector Development - Private sector investment
Sector Sub-Sector
Agriculture, natural resources, rural development - Agro-industry, marketing and trade
  - Forestry
  - Land-based natural resource management
Finance - Financial sector development
  - Infrastructure finance and investment funds
Transport - Multimodal logistics
  - Road transport (non-urban)