REI proposes plan on debt restructuring<\/p>\n
JAKARTA (JP): The Indonesian Property Developers Association
\n(REI) provided on Thursday a debt restructuring proposal to the
\nIndonesian Bank Restructuring Agency (IBRA), in a bid to prevent
\nliquidation of debtors' property assets at fire-sale prices.<\/p>\n
REI executive Kosmian Pudjiadi said IBRA would recover more
\nof the Rp 10.3 trillion (about US$1.4 billion) nonperforming
\nloans owed to the agency through debt restructuring measures.<\/p>\n
"We don't want IBRA to auction the property assets, because it
\nwould only benefit foreigners who could buy the assets at a very
\nlow price and would control the country's property sector," he
\nsaid.<\/p>\n
IBRA is a government agency established last year with a
\nmission to recover nonperforming loans taken over from
\nnationalized and closed down banks.<\/p>\n
Kosmian said under the debt restructuring proposal, IBRA would
\nestablish a real estate investment trust (REIT), which would
\nmanage all property assets of the indebted developers.<\/p>\n
He said REIT and the developers would design a debt
\nrestructuring plan, which would involve either a debt to equity
\nswap or a debt to asset swap.<\/p>\n
Kosmian said that at a later stage IBRA would form a real
\nestate investment corporation (REIC), which would repackage the
\nproperty assets into specific sectors, including hotels,
\napartments, offices, land banks, resorts, housing and industrial
\nestates.<\/p>\n
He explained that specific REICs would essentially become
\nseveral merged-property companies, which were financially healthy
\nbecause IBRA or REIT had cleaned up their debts.<\/p>\n
The Indonesian property sector has been badly hit by the
\nongoing economic crisis, skyrocketing interest rates and a
\ndevalued rupiah. Debts have inflated and sales revenues have
\ndropped sharply.<\/p>\n
Kosmian said IBRA could recover nonperforming loans through
\nsales of a maximum 50 percent stake in specific REICs to
\nprospective investors through private placement, an initial
\npublic offering or a rights issue mechanism.<\/p>\n
"The repackaging is needed to make it easier for prospective
\ninvestor to buy into the assets.<\/p>\n
"Through this mechanism, IBRA can still control the property
\nmarket and, at the same time, raise money," he said, adding that
\nfounding shareholders of the property companies could maintain
\nstakes in the company, though at a sharply diluted level.<\/p>\n
Kosmian said in order to attract investors, IBRA must inject
\nworking capital to specific REICs to increase their value.<\/p>\n
"The government can raise the money (for the working capital)
\nby issuing exchangeable bonds which could be either guaranteed by
\nthe Japanese government or the World Bank."<\/p>\n
Kosmian was optimistic about the country's property sector,
\nparticularly if the debt restructuring plan could proceed.<\/p>\n
He pointed out that the country's macroeconomic condition was
\nimproving, and the economy was projected to grow by 3 percent
\nnext year.<\/p>\n
"Because of the economic crisis, property supply has been
\nsharply cut down, meaning that the property sector had a bright
\nprospect."<\/p>\n
IBRA, however, does not share his optimism..<\/p>\n
IBRA deputy chairman Eko S. Budianto said recently that only
\nthe hotel and resort subsectors had good prospects because they
\nwere backed up by thriving tourism.<\/p>\n
Obstacles facing the REI-proposed debt restructuring proposal
\nmay also come from differences in valuing the property assets.
\nEko said the value of property assets under the agency had been
\nmarked up.<\/p>\n
"We can discuss these differences later. The important thing
\nis that we must prevent foreign control over the country's
\nproperty sector," Kosmian said.(rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rei-proposes-plan-on-debt-restructuring-1447893297",
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