IBRA offers 25 percent debt haircut facility 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 were also freed from the obligation of paying arrears of interest and fines, head of IBRA's communication division Suryo Susilo.

"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's members in charge of economic affairs, oversees IBRA's major bank and corporate restructuring process.

The 41,691 companies are those which owed 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 operations in 1998; and 38 banks suspended from operations in 1999, except for Bank Putera Multikarsa, Bank Ratu and Bank Prasidha Utama.

The statement did no 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 anyone 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 the 41,691 companies had a total debt of 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 has also planned 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 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 the total principle debt of Rp 14.338 trillion or about 5.31 percent of the agency's total credit portfolio.

The IBRA official said IBRA had completed the debt restructuring of all the SMEs, except for the 41,691 which are being offered with the debt haircut facilities.

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