IBRA offers 25% debt haircut for SMEs

IBRA offers 25% debt haircut for SMEs

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA)
is offering 41,691 small and medium enterprises (SMEs) a 25
percent reduction on their debt principals provided they pay
their debt in cash.

Under the so-called "fourth special crash program", the
41,691 companies will also be freed from the obligation of paying
arrears of interest and fines, head of IBRA's communication
division Suryo Susilo said.

"The implementation of this fourth special crash program has
been approved by the Financial Sector Policy Committee (FSPC)
with registration for participation in the program open until
Sept. 28," Suryo said in a statement made available to The
Jakarta Post late Tuesday.

The FSPC, comprising the Cabinet members in charge of economic
affairs, oversees IBRA's major bank and corporate restructuring
processes.

The 41,691 companies are those which owe less than Rp 5
billion (US$750.000) to 13 banks whose operational supervision
was transferred to IBRA from the central bank; seven
recapitalized banks; seven state-owned banks; 10 banks suspended
from operating in 1998; and 38 banks suspended from operating in
1999, except for Bank Putera Multikarsa, Bank Ratu and Bank
Prasidha Utama.

The statement did not specify why the debtors of Bank Putera
Multikarsa, Bank Ratu and Bank Prasidha Utama, which were among
the 38 banks suspended in 1999, are not included in the program.

"Principally, this debt-reduction program covers all kinds of
loan facilities, except for credits for consumption, including
loans for the purchase of houses, vehicles, credit cards," Suryo
said.

He said any one of the 41,691 companies interested in
participating in the program could register themselves at IBRA's
offices across the country.

An IBRA official told the Post that the 41,691 companies had
total debts amounting to Rp 3.53 trillion.

The debt haircut facility is part of IBRA's efforts to boost
the recovery of debts managed by the agency.

Aside from the SMEs, IBRA also plans to offer a 25 percent
reduction on debt principals to state-owned companies and a lower
dollar exchange rate -- that is Rp 7,800 -- for private firms for
the repayment of foreign debts.

The dollar has been stable at around Rp 9,000 over the past
several weeks following the assumption of power by President
Megawati Soekarnoputri in late July.

IBRA handles 213,497 indebted SMEs with a total principal debt
of Rp 14.338 trillion or about 5.31 percent of the agency's total
credit portfolio.

The IBRA official said that his organization had completed the
debt restructuring of all the SMEs, except for the 41,691 which
are being offered the debt haircut facility.

"Thus, the 41,691 companies are the last group of SMEs which
will settle their debts with IBRA," he said.(11)