IBRA collects Rp 2.7 trillion from loan asset sale

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.