Big debtors agree to repay debts at local banks
JAKARTA (JP): Some 173 large debtors, including companies owned by the family of former president Soeharto and his associate Mohamad Bob Hasan, have finally agreed to sign a letter of commitment to repay bad debts at local banks.
The letter of commitment stipulates the debtors will fully cooperate with the Indonesian Bank Restructuring Agency (IBRA), and be transparent about their financial and business conditions to allow the agency to sort out a debt restructuring measure.
IBRA public relations officer Franklin Richard said that 173 out of the country's 200 largest debtors had signed a letter of commitment by the Tuesday deadline.
He told The Jakarta Post indebted companies which signed the agreement included controversial carmaker PT Timor Putra Nasional and petrochemicalmaker PT Chandra Asri Petrochemical Center, respectively owned by Soeharto's sons Tommy Hutomo Mandala Putra, and Bambang Trihatmodjo.
The indebted companies are just two of the 200 largest debtors, owing over Rp 70 trillion in nonperforming loans (NPLs).
Earlier in the month, the indebted company owners and top executives were summoned by Minister of Finance Bambang Subianto and encouraged to be more cooperative with IBRA. The minister urged them to seek new ways to recover the loans, and reminded them that litigation measures would be taken by the end of August against debtors which failed to reach restructuring agreements.
Bambang also threatened to publicly disclose owners of the indebted companies by the end of this month if they declined to be cooperative.
IBRA announced early this month the names of the 200 largest indebted companies.
The move was made after ministerial impatience over the slow process of the loan restructuring, particularly as the debtors, mostly owned by well-connected businessmen, have tended to be uncompromising.
International Monetary Fund Asia Pacific director Hubert Neiss said on Tuesday recovery of the NPLs, either through restructuring or the sale of bank assets, would help reduce the country's costly bank restructuring program, currently estimated at 40 percent of gross domestic product.
"This is technically, as well as politically, a difficult process, but absolutely essential to ensure that the budgetary (bank recapitalization) costs are manageable.
"It is also essential for reasons of fairness not to put the whole financial burden of bank restructuring on the people. And, loan collection and asset disposal will be a major element in dealing with corruption. Most debtors who received bank loans on a noncommercial basis were well connected," he said.
IBRA has so far collected over Rp 172 trillion in NPLs from 10 liquidated banks, four nationalized banks, seven state banks and seven private banks which have signed on for the government- sponsored recapitalization program.
The agency is expected to control over Rp 230 trillion in nonperforming bank assets once the NPLs of two other major private banks and 38 banks closed down in March have been transferred.
IBRA deputy chairman Eko S. Budianto recently estimated that only 60 percent of the indebted companies were eligible for restructuring, while the remaining 40 percent would have to face liquidation, particularly because of their poor business prospects or debt burden levels.
He said properties, excluding hotels and multifinance companies, had minimal restructuring prospects.(rei)