20% of bad debts 'cannot be restructured'<\/p>\n
JAKARTA (JP): Deputy chairman of the Indonesian Bank
\nRestructuring Agency (IBRA) Eko S. Budianto projected on Thursday
\nthat some 20 percent, or Rp 46 trillion of the Rp 230 trillion
\n(US$32.86 billion) of nonperforming bank loans (NPLs) could not
\nbe restructured.<\/p>\n
He said the agency would seize assets that backed the bad
\nloans for liquidation.<\/p>\n
\"My estimate is that 20 percent (of the Rp 230 trillion NPLs
\nassets) will be seized,\" he said after a ceremony on the
\nappointment of the agency's 29 bailiffs.<\/p>\n
Eko said some of the NPLs might also lack eligibility for
\nrestructuring because the indebted companies no longer had
\nbusiness prospects, or the companies had too heavy a debt burden.<\/p>\n
Eko had earlier predicted that out of the 1,689 debtors owing
\napproximately Rp 155 trillion in NPLs, only some 60 percent were
\neligible for restructuring.<\/p>\n
He said IBRA had been empowered by a special government
\nregulation to foreclose on debtors' assets, which are also
\nclaimed by other creditors.<\/p>\n
IBRA is assigned to recover a massive amount of NPLs plaguing
\nmajor domestic banks, either through restructuring programs or
\nasset liquidations.<\/p>\n
Recovering the loans is essential to minimize the budgetary
\ncost of the costly bank restructuring and recapitalization
\nprogram. International Monetary Fund Asia Pacific director Hubert
\nNeiss estimated the NPLs could be approximately 40 percent of the
\ngross domestic product.<\/p>\n
The agency currently controls over Rp 172 trillion in NPLs.
\nincluding those transferred from 10 closed down banks, two
\nnationalized banks, seven state banks and seven banks which have
\nsigned recapitalization agreements with the government.<\/p>\n
IBRA is expected to eventually control over Rp 230 trillion in
\nNPLs once the 38 banks closed in March, seven nationalized banks,
\nand two other banks yet to sign recapitalization agreements with
\nthe government transfer their bad loans.<\/p>\n
IBRA has experienced difficulties restructuring the loans,
\nbecause a substantial amount of the NPLs are owed by companies
\nbelonging to well-connected businessmen, who have strongly
\nresisted cooperating with the agency.<\/p>\n
However there are signs the debtors are starting to be more
\ncooperative, particularly the 200 largest debtors.<\/p>\n
On Thursday, the agency announced that some 173 indebted
\ncompanies had signed a nonbinding letter of commitment to repay
\nthe loans. The debtors agreed to be transparent about their
\nfinancial and business conditions to allow IBRA to design
\nrestructuring measures.<\/p>\n
Organizations signing the letter included companies belonging
\nto the family of former president Soeharto and associates such as
\nMohamad Bob Hasan. Their companies are Humpuss business units, PT
\nTimor Putra Nasional, PT Kalimanis Plywood Industry, PT Kiani
\nKertas, PT Kiani Lestari, PT Asriland, PT Bukit Jonggo Asri, PT
\nSatelindo and PT Bimantara Citra.<\/p>\n
Eko expected IBRA would be able to restructure their debts
\neither through debt to equity swaps, debt to asset swaps or by
\ndebt maturity extensions.<\/p>\n
IBRA has promised to make a final decision on whether to
\nrestructure the debts or take litigation measures against debtors
\nby the end of August.<\/p>\n
Eko said debtors which did not sign the letter of commitment
\nmight have restructured their loans, repaid their debts or been
\ndeclared bankrupt.<\/p>\n
Separately, IBRA public relations officer Franklin Richard
\nsaid airline firm PT Sempati Air and financial companies PT
\nIndovac Finance and PT Pacific International Finance had been
\ndeclared bankrupt.<\/p>\n
\"We have just been informed, and we will verify this new
\ninformation,\" he said.<\/p>\n
Sempati airline, owned by Hutomo Mandala Putra, the youngest
\nson of Soeharto, owes IBRA some Rp 218.5 billion.<\/p>\n
Franklin said PT Risjadson had started to repay its debts,
\nwhile cellular telecommunications firm PT Asia Celluler had
\nalready restructured its Rp 354.64 billion debt. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/20-of-bad-debts-cannot-be-restructured-1447893297",
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