Bad debtors may benefit from IBRA loan auction<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
As the Indonesian Bank Restructuring Agency (IBRA) opened on
\nWednesday the bidding for its ambitious sale of some Rp 145
\ntrillion (US$16 billion) worth of non-performing bank loans,
\ntaxpayers may face a bitter reality that most of the loan assets
\ncould be retaken by their old owners at huge discounts off of
\nface value.<\/p>\n
Sofjan Wanandi, chairman of the National Economic Recovery
\nCommittee (KPEN), criticized IBRA for the lack of commitment in
\npreventing the old debtors from repurchasing the loans.<\/p>\n
\"The relatively short period provided for a due diligence
\nprocess on such a huge amount of assets would only make it easier
\nfor old owners (original debtors) to buy them back at lucrative
\ndiscounts,\" Sofjan told The Jakarta Post recently.<\/p>\n
IBRA took over the bad loans from ailing banks and closed the
\nbanks during the late 1990s financial crisis. The agency is
\nmandated to restructure the loans and sell them to raise cash to
\nhelp ease the burden of the government which has some $60 billion
\nin domestic debt as a result of the costly bank bailout program.
\nTaxpayers will have to cover these costs.<\/p>\n
Although under the law the original debtors are not allowed to
\nrepurchase the loans, IBRA itself has admitted that it would be
\nhard to really prevent them from doing so as they could easily
\nuse proxy buyers.<\/p>\n
\"We're not cops. It's the police who are supposed to do
\ninvestigations, not us,\" Mohammad Syahrial, IBRA deputy chairman
\nfor the Assets Management Credits (AMC), said when asked whether
\nthe agency would conduct an investigation to avoid old debtors
\nfrom repurchasing the loans.<\/p>\n
Citibank economist Anton Gunawan also said that it would be an
\nuphill task to identify old debtors: \"It's difficult (for the
\noriginal debtors) to be traced.\"<\/p>\n
When the country's financial system crashed in 1997, most of
\nthe country's indebted business groups, rather than repaying
\ntheir huge debts, were instead widely believed to have
\ntransferred huge amounts of the bank's money overseas to private
\naccounts.<\/p>\n
Now, under the loan asset sale program, they could be tempted
\nto buy back those loans from the government at huge discounts.<\/p>\n
IBRA has said it is expecting the loans to sell for about 20
\npercent to 30 percent of their face value. Investors are only
\nwilling to buy the debt at a large discount due to huge risks
\ninvolved in buying financial assets here, including a weak
\nbankruptcy law, which makes it hard to force debtors to repay
\nloans.<\/p>\n
The loan assets are divided into two groups with assets worth
\nbetween Rp 5 billion and Rp 50 billion categorized as commercial
\ndebts, while those worth more than Rp 50 billion grouped into
\ncorporate ones.<\/p>\n
IBRA said that more than 200 local and foreign investors have
\nregistered to bid for the loan assets, which involve 2,500 credit
\nportfolios consisting of both restructured and unrestructured
\nloans.<\/p>\n
The agency said that as of Wednesday's deadline, 203 or 82
\npercent of 248 investors who had signed a letter of interest had
\nregistered to bid. Of those who have registered, 91 are foreign
\ninvestors.<\/p>\n
IBRA will select the winning bidders on July 24.<\/p>\n
IBRA Chairman Syafruddin Temenggung said the agency would
\ncancel the sale and repackage the loans if bids were too low.<\/p>\n
The International Monetary Fund has previously asked IBRA to
\nsell the loans in packages instead of selling them individually.
\nBut IBRA argued that no local bidders could afford paying for the
\nloans if they were sold as a package.<\/p>\n
The launching of the massive sales program is part of the
\nagency's efforts to accelerate its asset sale and debt
\nrestructuring program.<\/p>\n
Aside from raising cash from the sale, the program is also
\ndesigned to allow the government to redeem its massive
\nrecapitalization bonds held by banks.<\/p>\n
Under the plan, the recapitalized banks will be allowed to use
\nthe bonds to pay for the loan assets.<\/p>\n
IBRA is targeted to recoup at least Rp 7.5 trillion worth of
\nbonds this year. Retiring the bonds will help ease the burden of
\nthe state budget in covering the interest of the bonds.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bad-debtors-may-benefit-from-ibra-loan-auction-1447893297",
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