Garuda's debt deal 'will not affect CAR'

JAKARTA (JP): The president of giant state Bank Mandiri, ECW Neloe, said on Thursday that the more than US$200 million debt deal with national flag carrier Garuda Indonesia would not erode its capital adequacy ratio (CAR) position.

Neloe said that Bank Mandiri's capital of about Rp 2.6 trillion was still higher than the about Rp 2 trillion loan.

"It will not affect our CAR because we have capital of around Rp 2.6 trillion plus profit sources," he told reporters on the sidelines of a signing ceremony of a cooperation agreement with state-owned savings and pension firm PT Taspen.

Domestic banks are required to have a minimum CAR of 4 percent which must increase to 8 percent by the end of next year. CAR is the ratio between capital and risk-weighted assets.

Neloe was responding to reports that Bank Mandiri wanted to immediately pull out from guaranteeing Garuda's debt because the debt transaction would affect the bank's capital condition.

Bank Mandiri is negotiating with European Credit Agency (ECA), Garuda's foreign creditor consortium, to restructure the airline's $610 million debt with the foreign creditor.

Bank Mandiri became involved in the debt transaction after it agreed to provide a $100 million loan in risk participation in the restructuring of Garuda's debt to ECA.

Garuda also owed Bank Mandiri another $103 million, but it had been agreed that the debt would be converted into four-year convertible bonds.

The foreign creditor initially demanded a government guarantee as a precondition for an agreement to reschedule Garuda's debt to 16 years.

ECA wants Bank Mandiri to maintain its risk participation for 10 years, but the state bank insists it will only agree to a three-year risk participation on the grounds that Garuda's debt with the foreign consortium will become sustainable after three years.

ECA is a consortium of credit agencies in France, Britain and Germany that financed the leasing of six A330 aircraft for Garuda.

Neloe said that he expected a restructuring deal to be concluded next week with ECA and Garuda.

Sources said that ECA had also demanded that Bank Mandiri should not be allowed to go public if it would make the government a minority shareholder.

Coordinating Minister for the Economy Rizal Ramli has said that Bank Mandiri will be privatized through an initial public offering in the fourth quarter of 2001.

Meanwhile, Neloe said that pension management company Taspen had Rp 15 trillion deposited at Bank Mandiri.

Bank Mandiri and Taspen signed a cooperation agreement in which the latter can use the former's banking facilities including payment center points, document custodian facility and cash management system facility.

Around 4.1 million government employees and 1.8 million retired employees are members of Taspen.

Elsewhere, Neloe said that Bank Mandiri booked a third quarter after tax profit of Rp 1.1 trillion and has total assets of Rp 232 trillion. (rei)