Debt deals: IBRA lawyers' latest tactic to recover $10b
The Jakarta Post, Jakarta
The team appointed to identify uncooperative debtors of the Indonesian Bank Restructuring Agency (IBRA) is prepared to offer debt rescheduling deals in a bid to recover $10 billion in lost funds.
Legal counsel member Luhut Pangaribuan, a lawyer, said his team would attempt to achieve the highest possible recovery rate.
Debt deals could recover more money than other methods -- such as pursuing debtors through the courts or attempting to seize their assets -- Luhut said.
"Rescheduling debts is an option," he told The Jakarta Post over the weekend.
The legal counsel was set up to identify among the 35 IBRA debtors the uncooperative ones, and recommend what legal action the government should take.
The debtors, all former bankers, owe the government some $10 billion in emergency liquidity loans, which they admitted to have misused but agreed to repay providing they would be released from criminal charges.
But most have not begun to repay their debts, almost three and half years into the four year agreement, raising fears that the money may never be recovered.
An IBRA proposal to extend the deadline to up to 10 years was axed following public criticism. Instead pressure rose for bad debtors to be tried, for which the legal counsel was established.
Over the next four weeks, the counsel will assess debtors' compliance to their debt settlement deals with IBRA.
The counsel consists of two teams, and Luhut's directive team will advise IBRA on the legal options available to force recalcitrant debtors to pay.
Under a three-month deadline, debtors must make up for shortfalls in their agreements, or could face jail or asset sequestrations.
Under the current settlement scheme, which for many expires this year, IBRA expects a recovery rate of only 12.38 percent.
Luhut argued that debt restructuring was one of the counsel's options, "should there be enough reason to believe that they (debtors) would cooperate."
"But there will be no negotiation.. it will be our offer that they have to accept or else."
Some analysts have urged the government demand debtors settle their debts through cash payments to secure a higher recovery rate.
The largest of the debtors, with total debts of some $8 billion, are tied to the poorly crafted Master of Settlement Acquisition Agreement (MSAA).
Under the MSAA, debtors' only obligation is to surrender assets in equal value to their debts, and let IBRA sell them to generate cash.
However, over time the assets have deteriorated in value, yielding only minimum payment for the agency.
IBRA has little power to demand the conglomerates cover the shortfalls, with some officials complaining that debtors stripped off the assets after they have were transferred to the agency.
Another team member, lawyer Frans H. Winarta said the legal reviews would start this week, with first results likely in the first week of April.
Next to the five under the MSAA, four others with debts of some Rp 23.15 trillion have signed the Master of Refinancing and Note Issuance Agreement (MRNIA).
The MRNIA is also an asset settlement deal but which requires debtors to surrender personal assets to cover the shortfall.
The other 26 debtors have signed Deeds of Indebtedness (APU) to repay debts of Rp 18.25 trillion through cash installments over a four-year period.