Creditors balk at debt plan of BII arm

JAKARTA (JP): President of Bank Internasional Indonesia (BII) Indra Widjaja said on Tuesday that three foreign creditors had rejected suggestions to reschedule over US$65 million in syndicated loans owed by the bank's wholly owned subsidiary, PT BII Finance Center.

Indra said the creditors, which include Asian Banking Corporation, Credit Agricole Indosuez and Arab Banking Corporation, turned down a proposal to reschedule the debts, which matured this year, for repayment in eight years.

"(BII Finance Center) actually asked for a rescheduling since because of the current condition it would be unable to repay the principle... but they (the creditors) turned it down," he said during a hearing with the House of Representatives Commission VIII for the state budget, finance and banking.

Indra said that during the rescheduling period, the multifinance firm would be able to repay the interest on the debt.

He added that the bank had reported the creditors to the Jakarta Initiative Task Force and the World Bank for their lack of cooperation in supporting the government's program.

He said the World Bank responded by saying that the foreign creditors' actions were ridiculous.

"I think its just their (creditors) tactic because their main target was BII," he said, without elaborating.

The government-sponsored task force was formed last year with a mission to play a mediating role in encouraging both creditors and debtors to reach out-of-court debt settlements.

Indra was responding to a report that the three foreign creditors had filed a bankruptcy suit against BII Finance Center with the Jakarta Commercial Court for failing to repay its debts.

The foreign lending institutions are also suing BII for its inability to make sure BII Finance Center repay its debts.

Indra was summoned by the House to explain the bank's recapitalization program, which is sponsored by the government.

Indra said the bank would issue other rights in September or October to reduce the government's stake in the bank.

He said that by the end of this year, the government investment in the bank would be reduced significantly.

BII is one of the country's major private banks which has been recapitalized to lift the bank's capital adequacy ratio to the minimum 4 percent level.

The bank launched its first rights issue in April, raising Rp 11.114 trillion for recapitalization purposes.

The government, which acted as standby purchaser of the rights issue, ended with more than a 70 percent stake in the bank.

A second rights issue by the bank reduced the government stake to 59.8 percent. (rei)