BNI faces uncertainty over Texmaco debt repayment

Rendi A. Witular, The Jakarta Post, Jakarta

State-owned Bank Negara Indonesia (BNI), the country's second largest bank, has hit a snag in its attempt to obtain full repayment of its US$67 million loan to troubled textile and engineering giant Texmaco Group.

BNI president Sigit Pramono said the Indonesian Bank Restructuring Agency (IBRA), the guarantor of the Texmaco debt, said it would only repay the debt in the form of credit assets.

The agency took over a large amount of non-performing loans from ailing banks in the wake of the late 1990s financial crisis. IBRA has been selling some of these loan assets, which are mostly unrestructured, to banks at a discount.

Sigit explained that accepting IBRA's credit asset offer could create future trouble for BNI, as the loans could turn bad.

"We don't want to be paid in credit assets because it is risky. We want it in cash or fixed assets," he said on Wednesday on the sidelines of a hearing with the House of Representatives Commission IX for finance.

BNI lent $89 million in letter of credit (L/C) facilities to Texmaco in 2001 as part of a deal to restructure the company's existing bad debt of Rp 9.8 trillion ($1.16 billion) to the bank. IBRA, which took over Texmaco's massive debt to BNI, agreed to guarantee the trade facility.

However, Texmaco defaulted on the trade facility, so IBRA agreed to repay $67 million after deducting the $22 million the bank owed to the agency.

IBRA offered BNI a list of assets for the debt repayment, but Sigit said most of the assets were in credit form. The bank is currently assessing the value of the assets.

Sigit said that if IBRA did not have adequate cash for the repayment, BNI wanted the agency the repayment made in a combination of cash and assets, with the amount of cash exceeding the value of the assets.

He also accused Texmaco of violating the lending agreement, as the company had allocated its revenues toward other purposes instead of repaying its debts to the bank.

Exporters normally use L/Cs issued by banks to finance the importation of raw materials for the production of export products. The loans are repaid with the revenues obtained from their exports.

Separately, in regards the government's plan to sell its 51 percent shares in BNI to strategic investors, Sigit said the plan should first be approved by the House and shareholders.