IBRA optimistic on loan asset sales

IBRA optimistic on loan asset sales

Dadan Wijaksana, The Jakarta Post,Jakarta

The Indonesian Bank Restructuring Agency (IBRA) expressed
optimism it would be able to get a relatively good price for the
huge bank loan assets that it's trying to sell, saying that it
would not accept low bids.

IBRA Chairman Syafruddin Temenggung said on Monday that he
would not tolerate unfair price valuations, even if they came
from reputable financial advisors.

"IBRA will use the FAs (financial advisors) only as a back up
for our internal team. And if the financial adviser's valuation
is lower than our valuation, I will use ours," Syafruddin told
reporters during a ceremony held to officially launch the sale of
some Rp 150 trillion (US$17 billion) worth of loan assets.

"If the bids are too low, we will cancel the sale and
repackage it. We will not open another session."

Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Tjakti and State Minister for State Enterprises Laksamana Sukardi
did not attend the ceremony as initially expected. There was no
explanation for this.

IBRA took over more than Rp 200 trillion worth of non-
performing loans (NPLs) from troubled banks in the late 1990s.
The agency is mandated to restructure the loans and sell them to
raise cash to help finance the state budget deficit.

IBRA is targeting a recovery rate of around 30 percent from
the loan sale.

But there has been concern that the agency might get a much
lower recovery rate of between 8 percent and 12 percent because
it combines the sale of restructured loans and unrestructured
ones.

Rejecting such concerns, Syafruddin guaranteed he would not be
intimidated by investors offering low prices. "We will welcome
any investors, both domestic and international. But if they are
offering a recovery rate of eight to ten percent, they had better
go home."

"Just as in the case of Bank Niaga, we will refuse to sell if
the price is not right," he said, referring to the agency's plan
to sell the government's 51 percent stake in Bank Niaga to
strategic investors, which might be canceled due to the very low
bids submitted by the bidders.

Meanwhile, the loan assets, which are made up of commercial
and corporate loans, will be sold via either a direct selling
system or tender mechanism. The sale process is expected to be
completed by Aug. 22, 2002.

Commercial loans are loans worth between Rp 5 billion and Rp
50 billion, while those above Rp 50 billion are categorized as
corporate loans.

The process itself is designed to be open for investors, both
local and international, in the most transparent and competitive
manner, Syafruddin said.

As for the original debtors, IBRA has put in place a rule that
prohibits them from buying back the assets.

Those who buy the assets must also not be affiliated with the
debtors and must sign a letter stating that they are not affected
by a conflict of interest.