IBRA to get tough on defiant debtors

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) says it will not hesitate to take litigation measures against uncooperative bank debtors in order to recover massive non-performing loans at local banks.

IBRA public relations officer Franklin Richard said the agency was empowered to take legal measures against bad debtors. The measures could include taking them to court to liquidate their assets through bankruptcy proceedings.

"This is not an empty threat. We'll use Government Regulation No. 17/1999, and, if necessary, we'll file for bankruptcy through the commercial court," he told the daily Kompas on Monday.

Franklin said the litigation measure would be prioritized to force the bad debtors to negotiate for debt restructuring measures with the agency.

He said filing for bankruptcy would be a last option.

IBRA has assumed over Rp 150 trillion (about US$18.75 million) in bad debts from the country's seven state banks, taken over banks, recapitalized banks and closed down banks.

Many observers have expressed doubts over whether the agency can recover the non-performing loans, particularly as the bulk of the loans are owed by well-connected businessmen.

The government has been criticized for its reluctance to force the bad debtors to accept debt restructuring agreements or asset foreclosures.

Early this month, IBRA publicly announced the list of its 200 largest bad debtors in a bid to quell doubts about the government's seriousness in recovering the non-performing loans.

In the announcement, IBRA called on the debtors to resume or start debt restructuring talks with the agency.

The list includes indebted companies linked to the family of former president Soeharto and its associates.

Franklin said that since disclosure of the debtors list, some 50 percent of the debtors had begun negotiations with IBRA, with particular emphasis on loan recovery proposals.

Minister of Finance Bambang Subianto earlier said the government would enforce stricter measures against the country's bad debtors. He said he expected an IBRA announcement regarding the first batch of debtors to reach a loan recovery agreement this month.

"There are measures that we won't use right now because we're still hoping for the good will of the debtors to talk (for a loan workout strategy)," he said after IBRA disclosed its list of the largest bad debtors.

Bambang said the recovery of the non-performing loans was essential to help ensure the success of the costly government bank recapitalization.

He said restructuring of the other categories of loans, particularly substandard and doubtful loans, were important to reduce bank recapitalization costs.

Analysts have expressed concerns these type of loans could easily be transformed into non-performing category ones unless they are restructured.

Several banks have announced their list of debtors in an effort to force them to discuss debt restructuring strategies. (rei)