IBRA launches Rp 76t bad loan sale

IBRA launches Rp 76t bad loan sale

Dow Jones, Jakarta

The Indonesian Bank Restructuring Agency, or IBRA, has opened bidding for its sale of bad loans worth a nominal Rp 76 trillion (about US$830 million), which it took over from the banking system after the 1997-98 Asian financial crisis

IBRA said in a statement on Thursday it will announce the winner of the auction in April. The state agency said it will set a floor price for the debt sales, but gave no further details.

The agency has been selling off bad loans since the government set it up in 1998 following the near-collapse of the financial sector under a weight of unpaid debt.

IBRA has sold about Rp 91 trillion worth of face value loans previous to this auction, but has only been able to raise around 20 percent-30 percent of the nominal amount as investors demanded huge discounts. Indonesia's weak bankruptcy laws make it hard to get money back from debtors.

The agency is set to close down operations by the end of this year. Apart from bad loans, IBRA has also been selling assets taken over from former bank owners that owe the state billions of dollars.

As the assets under IBRA diminish, the government is turning to privatization of state-owned enterprises as its main source of income this year. Jakarta needs revenues such as these to help reduce its large public debt.