House, govt meet quietly over BII

JAKARTA (JP): The government held a closed-door meeting with members of the House of Representatives (DPR) late on Wednesday over their plan to issue bonds to Bank Internasional Indonesia (BII).

The decision to hold the closed-door meeting was made after Minister of Finance Boediono and State Minister of State Enterprises Laksamana Sukardi "failed" to convince legislators of the move during an open meeting earlier in the day.

"Due to the sensitivity of the issue, we would like to explain the issue in a closed-door meeting," Laksamana said.

The government is seeking the House's approval over its plan to issue hedge bonds totaling around Rp 12 trillion to allow the transfer of BII's bad debts to the Indonesian Bank Restructuring Agency (IBRA). Debts worth US$1.06 billion are owed by BII's parent company Sinar Mas Group.

Under the plan, once the House provides approval, IBRA would inject recycled bonds into BII to facilitate transfer of the bad debt.

The government would later replace the recycled bonds with rupiah hedged bonds carrying a lower interest rate.

The arrangement, however, requires the owners of Sinar Mas to surrender assets worth 145 percent of the total debt.

Legislators are concerned that the assets transferred by the Sinar Mas Group have also been pledged to overseas creditors, which may result in the government being unable to sell them when necessary.

Sinar Mas owes around $12 billion to its bond holders overseas.(03)