IBRA may recover only fraction of bad debts

IBRA may recover only fraction of bad debts

JAKARTA (JP): Less than half of the more than Rp 400 trillion
(about US$47 billion) worth of bad debts transferred to the
Indonesian Bank Restructuring Agency (IBRA) is expected to be
recovered, agency chairman Glenn Jusuf said here on Thursday.

"The expected rate of the bad debt recovery is between 30
percent to 40 percent," Glenn told journalists after the signing
of a debt restructuring agreement between state investment
company PT Danareksa and its creditors.

He said the relatively low recovery rate is realistic enough
considering the unfavorable economic circumstances and the
experiences of Thailand, another crisis-hit country.

Theoretically speaking, Glenn said, nonperforming loans
transferred to IBRA did not have value when they were effectively
written-off from the banks' balance sheets.

"But still we are trying to sell those assets with the highest
possible bid prices, through auctioning," Glenn said, adding that
the ideal period to sell the assets would be five to seven years
from now.

IBRA is the agency established by the government last year to
manage and sell the assets of troubled banks as part of the
government's efforts to bail out the country's ailing banking
sector.

The agency received more than Rp 158 trillion (US$18 billion)
in nonperforming loans (NPLs) from 10 banks liquidated in 1998
(Rp 35 trillion), seven state banks (Rp 100 trillion) and Bank
Danamon and Bank Tiara (Rp 23.2 trillion).

It expects to receive another Rp 220 trillion in nonperforming
bank loans from nine banks taken over and 38 banks closed in
March this year.

With the transfer of the bad debts, IBRA automatically assumes
the right to sell assets put up by borrowers as loan collateral.

Minister of Finance Bambang Subianto said the government is
drafting a number of alternatives to deal with the bad debts.

The options include the rescheduling of the bad debts,
especially those of relatively healthy corporate debtors, debt to
equity swap and selling off loan collateral. (02)