Bambang rejects demand to bail out ailing debtors
JAKARTA (JP): Minister of Finance Bambang Subianto has rejected the proposal to swap bad debts of ailing corporate borrowers into government equity, according to a senior official.
The source, who asked for anonymity, said here on Wednesday the minister insisted that government equity participation would only be optional for corporate debtors with positive cash flow.
"They (debtors with negative cash flow) have to find ways to make their cash flow positive," the source quoted Bambang as saying.
The source did not provide further details.
Bambang and other senior economic ministers are crafting ways to restructure the loans of the country's 20 largest corporate debtors at the seven state banks.
Details on the restructuring measures, which will be an initial stage for the restructuring of the overall real sector, is scheduled to be announced on Friday.
The Indonesian Bank Restructuring Agency (IBRA) has assumed over Rp 100 trillion in nonperforming loans at the seven state banks. More than a half of the country's bad debts are owed by the 20 corporate debtors.
The agency is expected to handle a total of Rp 220 trillion in nonperforming loans by the end of this month, including from closed down banks, taken over banks and recapitalized banks. This group of banks are effectively under the control of the government either due to massive government liquidity support injected into the banks or due to the government recapitalization program.
It is public knowledge that most of the corporate debtors, particularly those at state banks, are politically well-connected businesspeople.
IBRA deputy chairman Eko S. Budianto said on Tuesday that the 20 largest debtors included PT Chandra Asri Petrochemical Center, Tirtamas Group, Bank Papan Sejahtera Group, PT Semen Cibinong and PT Timor Putra Nasional.
IBRA will separate the corporate debtors into two groups. The first group will comprise those considered to have the integrity to repay their debts. The second group will comprise those considered to lack integrity. The first group will undergo restructuring, while the latter could face foreclosure and liquidation. Corporate debtors which no longer have economic value will also be liquidated.
According to the agency's loan workout plans, corporate debtors with positive cash flows will be encouraged to increase their economic value and restructure the tenor of their debts.
The restructuring options for corporate debtors with negative cash flow but with integrity are tenor restructuring, interest restructuring, principal restructuring and a combination of these measures.
But Bambang has dropped the debt to equity swap option for corporate debtors with negative cash flow.
President of state Bank Rakyat Indonesia Djoko Santoso Mulyono said earlier that state banks would not provide a debt reduction facility unless the debtors agreed to repay their debts outright.
Many of the country's large firms, except several resource- based firms and textile exporting companies, are believed to have suffered negative cash flow amid the current deep economic crisis.
The restructuring of the real sector and banking industry are seen as essential to the country's economic recovery.
Bank Indonesia director Miranda Gultom said on Wednesday that without efforts to restructure the real sector, it would be difficult to expect lower interest rates and the elimination of negative interest rate spread currently suffered by the banking sector.
Several opposition leaders had warned the government not to provide debt cuts or debt write-offs through government equity participation for corporate debtors at state banks.
They pointed out that the large amount of nonperforming loans belonged to society and must be fully repaid.
The recent visit of timber tycoon Prajogo Pangestu to President B.J. Habibie to report the restructuring plans of his PT Chandra Asri Petrochemical Center raised speculation that high-profile lobbying efforts have been in the works to influence the debt restructuring process. (rei)