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)