IBRA defends MSAA extension

IBRA defends MSAA extension

The Jakarta Post, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) has claimed
that the controversial extension of the Master of Settlement and
Acquisition Agreement (MSAA) is necessary to restart faltering
debt payments from former bank owners.

IBRA chairman I Putu Gede Ary Suta said that without the
ruling, which received the backing of the powerful Financial
Sector Policy Committee (FSPC), the government might never get
its money back.

"We needed this breakthrough decision to get them (bank
owners) to start repaying their debts," he told reporters on
Thursday.

The MSAA deal was signed in 1998 between IBRA and former bank
owners, including the Salim Group, former owner of nationalized
Bank Central Asia (BCA), Sjamsul Nursalim (of the defunct Bank
BDNI), Bob Hasan (of the defunct Bank Umum Nasional) and
Sudwidkatmono (of Bank Subentra).

Their banks were among those that received Bank Indonesia
liquidity emergency loans worth Rp 144.5 trillion (about US$14.2
billion) at the peak of the 1998 financial crisis.

In an effort to recoup the public funds, IBRA and the owners
of the banks signed a deal known as the MSAA.

The deal is valid for four years and is due to expire in 2002.

But Ary Suta said that after 3.5 years had passed, MSAA
debtors had done little to repay their debts.

"I am not satisfied with this either. This is why we need a
commercial solution in case they don't pay at all, because time
is running short," he said.

Last week, the FSPC decided to lengthen the MSAA deal to
10 years and charge debtors lower interest rates.

The FSPC is in charge of debt restructuring deals worth more
than Rp 1 trillion, and sits together with senior economic
ministers.

Its decision drew criticism from analysts who questioned why
MSAA debtors had been given a break when they had not even begun
to repay their debts.

Except for the Salim Group, the others have not begun their
debt payments as their MSAAs are under revision. Ary Suta fell
short of saying whether the MSAA extension incorporated final
deals with the other MSAA debtors.

Under the MSAA, the former bank owners can settle their debts
if they surrender assets of equal value to IBRA.

However, if the value of these assets declines by the time
IBRA sells them, the agency has no authority to ask for more.

Thus far, IBRA has been selling off Salim assets at values
much lower than they were at the time Salim surrendered them to
the agency.

Salim's assets are among the most precious under IBRA. The
sales of these have contributed much to the agency's meeting its
asset sales target of Rp 27 trillion this year.

Now, with most of the Salim assets sold, IBRA must scramble
for new ones to sell next year. The MSAA extension may pave the
way for IBRA to secure the assets of the other debtors.