Foreign investors show interest in IBRA loan assets

Dadan Wijaksana, The Jakarta Post, Jakarta

More than 140 investors, including foreign financial institutions, have expressed interest in purchasing bank loan assets worth more than Rp 150 trillion (about US$17 billion), held by the Indonesian Bank Restructuring Agency (IBRA), now on offer for sale.

IBRA deputy chairman for Asset Management Credit (AMC) Mohammad Sjahrial said on Thursday that around one-third of the prospective buyers were foreigners, including high-profile names such as Morgan Stanley Dean Witter & Co., Lehman Brothers Holdings Inc., Credit Suisse First Boston Corp., JP Morgan, and Solomon Smith Barney Inc.

He was quoted by Dow Jones as saying that local investors that had expressed interest included state-owned Bank Mandiri, Danareksa Securities and Bank Central Asia (BCA).

IBRA officially launched its largest-ever asset sale program earlier this week.

The loans, both unrestructured nonperforming loans (NPLs) and restructured ones, are owed by some 2,500 debtors. The agency took over some Rp 250 trilion worth of NPLs from closed-down and troubled banks in the late 1990s.

IBRA expects to get a recovery rate of around 30 percent from the loans.

The presence of respectable firms in the sale of the loan assets should provide relief for the agency, as this will increase the level of bidding competition, and thus produce make respectable proceeds.

No less than Syafruddin Temenggung, the agency's chairman, has pledged not to accept low bids from any investor.

Many, including the IMF, doubt that IBRA could raise enough interest in the loan asset sales partly because the agency has combined the sale of restructured and unrestructured NPLs.

The IMF has said that to appeal to foreign investors' appetites, IBRA should sell the loan assets in packages, rather than individually. The agency rejects this demand, arguing that selling the loans in packages would cause IBRA to only get a low recovery rate.

IBRA has said the sale process would be carried out through a direct sale and auction mechanism, with the agency hoping to complete it by Aug. 22.

However, those who purchase the loan assets must not be affiliated to the original debtors and therefore must sign a "nonconflict" of interest letter to avoid old debtors from buying back their assets.

The loans are made up of commercial and corporation loans. Commercial loans are those worth Rp 5 billion to Rp 50 billion, while those above Rp 50 billion are categorized as corporate loans.