BNI agrees to keep Texmaco Group's head above water<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
State-owned Bank Negara Indonesia (BNI) has agreed to maintain a
\ntrade financing facility for troubled textile and engineering
\ngiant Texmaco Group.<\/p>\n
But this would apply only if Texmaco founder and owner
\nMarimutu Sinivasan started repaying debts owned based upon
\nprevious financing facilities extended by BNI.<\/p>\n
The agreement was reached during a meeting on Monday between
\nthe bank, officials of the Indonesian Bank Restructuring Agency
\n(IBRA), and Marimutu Sinivasan, a press release issued by the
\nagency said.<\/p>\n
No top officials from either Texmaco or BNI were available for
\ncomment.<\/p>\n
Texmaco owes some US$29 million under a trade financing
\nfacility in the form of a letter of credit (L\/C) to BNI that has
\nbeen causing problems since June 2001.<\/p>\n
Because IBRA has gone guarantor for Texmaco's debts to BNI,
\nthe agency will have to repay the debt in case of default. This
\nwould mean that the taxpayer would ultimately have to shoulder
\nthe burden. The guarantee is part of a debt restructuring deal
\nagreed by IBRA and Texmaco in early 2000.<\/p>\n
But amid public criticism over the special treatment extended
\nto Texmaco, IBRA then persuaded BNI to give Texmaco more time to
\nrepay its debts.<\/p>\n
Under Monday's agreement, Sinivasan was given until June to
\ncome up with at least $25 million in cash to repay the debts owed
\nto BNI.<\/p>\n
BNI's commitment to maintaining the Texmaco L\/C facility is
\ncrucial for ensuring the business sustainability of the group as
\nno other bank seems willing to lend to it given its bad track
\nrecord.<\/p>\n
In fact, Texmaco almost sent BNI into bankruptcy when it
\ndefaulted on debts worth some Rp 9.8 trillion. The government
\nmoved in to bail out the bank. Texmaco's massive debts were then
\ntaken over by IBRA. Texmaco and IBRA agreed on the restructuring
\nof these debts in 2000.<\/p>\n
Part of the deal was that IBRA agreed to guarantee up to $100
\nmillion borrowed from BNI under a trade financing facility. BNI
\nsaid it had only lent the money in the light of the IBRA
\nguarantee.<\/p>\n
It was in the interest of IBRA to ensure that Texmaco could
\ncontinue operating in order to recoup the money owed by the group
\nto the state.<\/p>\n
Texmaco has been criticized for failing to repay the $29
\nmillion trade financing facility. IBRA officials have admitted
\nthat in addition to adverse economic circumstances, Texmaco
\nmanagement had violated the lending arrangements.<\/p>\n
The trade financing facility was supposed to be used for
\nTexmaco's textile operations, but part of the money went to its
\nengineering division.<\/p>\n
Exporters normally use L\/Cs issued by banks to finance the
\nimportation of raw materials. They then repay the loans once they
\nhave obtained revenue from their exports.<\/p>\n
But in the case of Texmaco, IBRA and BNI were unable to
\nmonitor the flow of the revenues being received by Texmaco. Under
\nMonday's deal, it was agreed that a special escrow account would
\nbe set up to accommodate incoming Texmaco revenues so as to
\nensure that the money would go toward repaying the money borrowed
\nunder the BNI facility and the debts owed to IBRA.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bni-agrees-to-keep-texmaco-groups-head-above-water-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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