Wed, 09 Jul 2003

IBRA opens bidding for nonperforming loans

The Jakarta Post, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) opened on Tuesday the bidding for some Rp 35.5 trillion (US$4.33 billion) worth of bad loans.

The agency said the winning bidders would be announced on Sept. 5.

IBRA took over about Rp 350 trillion worth of nonperforming loans (NPLs) from the ailing banking sector in the wake of the late 1990s financial crisis.

The agency is mandated to restructure and sell the loans to raise cash and help finance the state budget deficit, and to restructure the banking industry. However, IBRA has been unable to restructure all of the NPLs, and has been forced to unload loans that have not been restructured.

During the past year, the agency has sold NPLs with a total face value of Rp 120.35 trillion, but the proceeds from the sales only amounted to about 30 percent of the face value. This was because investors demanded deep discounts due to uncertainty in the country's legal system, making it difficult to force recalcitrant debtors to repay their debts.

The government has ruled that the original debtors are not allowed to buy back their loans. But there have been suspicions that some debtors have managed to repurchase their bad loans via proxies at a large discounts.

IBRA has been under pressure to unload various assets it took over from the banking sector in the late 1990s, with the agency's mandate scheduled to end early next year.