BNI faces uncertainty over Texmaco debt repayment

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.