IBRA to launch $17b loan asset sale Monday<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
As the Indonesian Bank Restructuring Agency (IBRA) gears up with
\nan ambitious plan to sell off bank loan assets worth Rp 150
\ntrillion (some US$17 billion), some analysts have criticized the
\nagency for including unrestructured nonperforming loans (NPLs) in
\nthe disposal program.<\/p>\n
The agency will officially launch its largest-ever asset sale
\nprogram on Monday in a ceremony to be led by Coordinating
\nMinister for the Economy Dorodjatun Kuntjoro-Jakti and State
\nMinister of State Enterprises Laksamana Sukardi.<\/p>\n
Banking analyst Dradjat Wibowo says that by combining the sale
\nof restructured NPLs and unrestructured ones, IBRA risks
\nsuffering a low recovery of the loans.<\/p>\n
\"IBRA is assigned not merely to sell assets, but to
\nrestructure them first, then sell them to the system,\" he told
\nThe Jakarta Post over the weekend, adding that the recovery rate
\nof the loans would likely stand at around 15 percent, as against
\nthe agency's target of about 30 percent.<\/p>\n
IBRA received more than Rp 200 trillion worth of NPLs from
\nailing banks in the late 1990s. The agency is tasked to
\nrestructure the loans and sell them to raise cash to help finance
\nthe state budget deficit.<\/p>\n
This year, the agency is targeted to raise more than Rp 35
\ntrillion in cash to help plug the 2002 state budget deficit,
\nestimated at more than Rp 42 trillion or 2.5 percent of gross
\ndomestic product.<\/p>\n
Banking analyst Mirza Adityaswara has hailed the program as a
\nbreakthrough, saying that IBRA had no other choice than to
\ninclude the unrestructured loan assets in the sale program if it
\nwants to save them from further deterioration.<\/p>\n
\"The ideal way is indeed to restructure all the assets first
\nbefore selling them, but it has been proven to be ineffective so
\nfar, so why not do it this way?\" he said, pointing out that past
\nrestructuring efforts had proven to be costly and very time
\nconsuming, while the sale of restructured loans only turned out
\nto generate low recovery.<\/p>\n
IBRA said that the loans to be disposed were owed by some
\n2,500 debtors with various loan sizes, comprising loans of Rp 5
\nbillion to Rp 50 billion, loans of more than Rp 50 billion, and
\nthose of more than Rp 750 billion.<\/p>\n
The last two category of loans are owed by large
\nconglomerates. The agency has yet to disclose which giant loans
\nare to be included in the program, but said earlier that loans
\nowed by huge business groups like the Texmaco Group, the Tirtamas
\nGroup and the Barito Group would be excluded from the program.<\/p>\n
The International Monetary Fund (IMF), which is sponsoring the
\ncountry's economic reform program, first insisted that IBRA sell
\nthe loans in packages to attract foreign buyers.<\/p>\n
But IBRA chairman Syarifuddin Temenggung rejected the idea,
\nsaying that selling the loans in packages would generate a very
\nlow recovery of around 8 percent to 10 percent as evident in
\nother crisis-hit countries in the region.<\/p>\n
IBRA is planning to sell the loans on an individual basis, and
\nis optimistic that it can generate a high rate of recovery on the
\nback of high demand from local investors. It will sell the loans
\nvia a direct sale mechanism and tender process.<\/p>\n
Although the sale program is designed to be open to any
\ninvestors, both local and foreign, IBRA has prohibited the
\noriginal debtors from buying back the assets.<\/p>\n
Those who buy the assets may not be affiliated to the debtors
\nand must sign a non-conflict of interest statement.<\/p>\n
But another IBRA official said that the agency would adopt the
\nIMF strategy if its own strategy proved ineffective in the first
\nthree months.<\/p>\n
Meanwhile, an analyst with a state bank doubted whether the
\nagency had the capacity to manage such a massive asset sale
\nprogram.<\/p>\n
The agency has been criticized in the past for slow progress
\nin the disposal of assets.<\/p>",
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