IBRA collects Rp 2.7 trillion from loan asset sale
Dadan Wijaksana, The Jakarta Post, Jakarta
The Indonesian Bank Restructuring Agency (IBRA) has to be content with a recovery rate of only 20 percent from its current massive sale of bank loan assets.
The sales program has so far generated only Rp 2.7 trillion (US$300 million) in proceeds compared to the total face value of almost Rp 70 trillion in non-performing loan assets on offer.
IBRA deputy chairman Mohammad Syahrial told reporters on Tuesday that the program only drew 66 investors, which resulted in a meager Rp 13.2 trillion in bids on the various assets.
Syahrial added, however, that the proceed volume was still likely to rise as some investors had been given chances to re- bid.
"For those assets that fail to lure buyers, we'll sell them in the next sale program early next year," he said as reported by detik.com, adding that the program would be the last to be conducted by IBRA.
The current sale program, launched in August, was the second ever conducted by IBRA, with the first having been completed in June. IBRA raised Rp 23.1 trillion during the first sales program, out of the Rp 60 trillion worth of loans that attracted the bids of some 210 investors.
The total amount of loans offered during the first sale was worth Rp 135 trillion.
Under the current program, IBRA is selling 91,000 credit portfolios from a total of 780 debtors, with the assets divided into commercial and corporate debts. Commercial debts are those worth under Rp 100 billion, while corporate debts are worth over Rp 100 billion.
IBRA argued that the program was part of crucial efforts to accelerate its assets sale and debt restructuring plans, which have been progressing slowly so far.
Established in 1998 and controlling trillions of Rupiahs' worth of bad assets taken over from the ailing banking sector, IBRA is mandated to restructure the assets first before returning them to the private sector.
However, the asset restructuring process has proved to be difficult and time-consuming, forcing IBRA to come up with the current program of selling unrestructured assets.
The program has now proved to be fruitless as well, considering the evidence of a mere Rp 2.7 trillion in proceeds from the overall Rp 69.9 trillion of assets on offer.
Although the agency stops short of explaining the reasons for the program's modest result, analysts have pointed to at least three reasons:
First, investors have been hard to come by because most of the loan assets on offer were those that had failed to attract investors in the first sales program in June. Of the total assets on sale, only around 33 percent were newly offered ones, critics argued.
Second, the program was launched when the investment climate in the country was heading for its worst, especially after the Oct. 12 Bali bombing tragedy, which had further damaged the country's image in the eyes of investors.
Third, Bank Indonesia's ruling, which limits a bank's capacity to purchase bad loans from IBRA, has considerably narrowed the market for the agency's assets.
Bank Indonesia Regulation No. 4/7/2002 on prudent banking principles and the purchase of IBRA loans, made effective Sept. 27, limits the amount of purchase to 50 percent of a bank's core capital.
The ruling is meant to prevent the country's still fragile banking sector from amassing high-risk unrestructured loans from IBRA.