40% of debtors face liquidation: IBRA

40% of debtors face liquidation: IBRA

JAKARTA (JP): Deputy chairman of the Indonesian Bank
Restructuring Agency (IBRA) Eko S. Budianto said on Wednesday
that only about 60 percent of its 1,689 debtors could be
restructured in a bid to recover their debts.

"Only 60 percent are eligible for restructuring. We have to be
realistic because there are businesses which have no prospects at
all, and some have too much debt," he said.

Liquidation looms for the 40 percent of companies saddled with
huge debts and few prospects, he said.

IBRA announced on its website on Tuesday there were 1,689
debtors owing Rp 155 trillion (US$21.23 billion) in problem loans
to the agency.

Eko said the amount of problem loans transferred to the agency
as of Wednesday already totaled Rp 172 trillion.

These debts are from 10 liquidated banks, four nationalized
banks, seven state banks and seven private banks which have
signed on for the government-sponsored recapitalization program.

IBRA is a government agency invested with the task of
recovering nonperforming loans (NPLs) of liquidated banks, banks
taken over by the government, recapitalized banks and state
banks.

Eko said the agency expected to eventually control over Rp 230
trillion in NPLs, including those still to be transferred from 38
banks closed down and seven banks taken over in March, and two
other private banks which will join the recapitalization program.

Eko said that of the Rp 172 trillion in problem loans, about
90 percent was owed by 900 business groups, while the remainder
was retail credits owed by independent debtors.

"I think chances for recovery of the retail loans are much
higher," he said.

He estimated that only 60 percent of the corporate loans owed
by the 900 obligors could be recovered through a restructuring
program.

Eko identified prospective businesses for restructuring,
including export-oriented firms, low import content industry,
consumer goods companies and hotels.

"The property sector has no prospect, except for hotels
because of the promising outlook for tourism," he said.

"Multifinance companies have little prospect for
restructuring.

"Petrochemicals are quite viable, but it depends on the
condition of individual companies, particularly their debt
structure."

Among the companies owing massive debts is petrochemical firm
PT Chandra Asri Petrochemical Center, which is partly owned by
Bambang Trihatmodjo, a son of former president Soeharto. It owed
Rp 2.92 trillion to several state banks.

Eko said the agency would sell the assets of debtors deemed
ineligible for restructuring.

Many have criticized the agency for its slowness in recovering
the NPLs, with suspicions raised because many of the debtors are
companies belonging to politically well-connected businesspeople.

Late last week, finance minister Bambang Subianto and IBRA met
with the key executives of the 200 largest debtors, including
Mohamad "Bob" Hasan, a longtime intimate of Soeharto. Bambang
urged them to sign a "letter of commitment" pledging to be
transparent about their companies' financial holdings and
business condition to allow IBRA to design a restructuring
program.

Eko said the 200 largest debtors, owing some Rp 70 trillion in
NPLs, are expected to sign the letter of commitment by the June
22 deadline.

Two companies belonging to Hutomo "Tommy" Mandala Putra,
another Soeharto son, signed the letter of commitment on
Saturday. They are shipping operation PT Humpuss Intermoda and
container firm PT Humpus Peti Kemas.

Eko warned that owners of indebted companies declining to
cooperate or sign the letter of commitment would have their names
published in newspapers on June 30.

Indonesia promised the International Monetary Fund, which has
arranged multibillion dollar funding to finance the country's
economic reform programs, that it would pursue litigation by the
end of August against indebted companies failing to reach
restructuring agreements with IBRA.

Eko said the government's restructuring program did not
include a debt reduction option.

Alternatives offered under the debt restructuring program
include debt to equity swap, debt to asset swap, maturity and
grace period extension and rescheduling of debt installments
according to cash flow conditions.

"We have held talks with a total of 350 debtors, and many are
willing to sign the letter of commitment. We expect to complete
(loan workout) programs for 400 debtors by the end of December,"
Eko added.(rei)