IBRA debtors seen to be regaining control of assets

IBRA debtors seen to be regaining control of assets

The Jakarta Post, Jakarta

Selling assets in large chunks has helped the Indonesian Bank
Restructuring Agency (IBRA) accelerate its asset-sale program,
but analysts now question whether the agency may have been
allowing these assets to fall into the wrong hands.

Last May, IBRA launched its first massive round of asset sales
involving the divestment of Rp 135.45 trillion (about US$14.8
billion) worth of assets in one go.

Similar programs worth trillions of rupiah are still in
progress, boosting IBRA's sales to Rp 41 trillion as of this
month. Its 2002 target is Rp 42.8 trillion.

"The grand policy looks good: to sell assets now," banking
analyst Lin Che Wei said on Wednesday. "But how they sell these
assets is also important and on this (question) everyone seems to
be turning a blind eye."

According to Che Wei, the massive sale program has made it
easier for IBRA debtors to repurchase their assets using third
parties like state banks and investment firms as fronts.

IBRA debtors are not allowed to buy back their assets unless
they have repaid their debts to the agency.

The assets being sold consist mainly of bank loans that went
bad and were transferred to IBRA when the 1997 economic crisis
saw the banking sector nearly collapse under a mountain of bad
loans.

IBRA also took control of stocks and properties belonging to
the borrowers of these bad loans as part of the debt repayment
process.

In total, it owns some Rp 600 trillion worth of assets after
the government spent roughly the same amount in issuing bonds to
keep the banking sector afloat.

But while investors previously bought IBRA assets
individually, the massive asset-sale program has forced investors
to now purchase them as packages. These are then categorized by
value or the debtors to whom the assets formerly belonged.

And because of the difficulties in filtering out bad assets,
the packages are sold at a discount of about 70 percent less than
their nominal worth.

The leading buyers are securities firms and state banks.

Che Wei said debtors could seek bank loans to purchase the
heavily discounted assets. "You can then use your assets as
collateral to seek new loans," he explained.

He said he had met a debtor who lost his factory to a bank in
1996 and was recently approached by another bank to purchase the
same factory from IBRA. "He was asked (by the bank) whether he
wanted the factory back? -- We'll finance it."

Used as collateral at 100 percent of their value, the
purchased assets could secure a debtor an even higher loan than
the one used to purchase the assets from IBRA. The second loan
would allow the debtor to refinance the first one, while still
ending up with enough funds to pay the bank a handsome fee.

"Around 80 percent of the assets have been sold right back to
their owners at just 30 percent of their price," said a
businessman who declined to be named.

Economist Faisal Basri said these schemes were the natural
consequence of a corrupt environment where political interests
forced state institutions like IBRA to make cash contributions.

Che Wei added that along the way personal greed also set in,
aggravating the scale of corruption.

IBRA has denied it is selling the assets back to debtors,
arguing that it always checked the backgrounds of prospective
buyers, and required them to state that they had no links to the
debtors.

Previous asset-sale agreements also included a locked up
period during which time investors were not allowed to resell
their newly purchased assets.