IBRA to launch $17b loan asset sale Monday

IBRA to launch $17b loan asset sale Monday

Dadan Wijaksana, The Jakarta Post, Jakarta

As the Indonesian Bank Restructuring Agency (IBRA) gears up with
an ambitious plan to sell off bank loan assets worth Rp 150
trillion (some US$17 billion), some analysts have criticized the
agency for including unrestructured nonperforming loans (NPLs) in
the disposal program.

The agency will officially launch its largest-ever asset sale
program on Monday in a ceremony to be led by Coordinating
Minister for the Economy Dorodjatun Kuntjoro-Jakti and State
Minister of State Enterprises Laksamana Sukardi.

Banking analyst Dradjat Wibowo says that by combining the sale
of restructured NPLs and unrestructured ones, IBRA risks
suffering a low recovery of the loans.

"IBRA is assigned not merely to sell assets, but to
restructure them first, then sell them to the system," he told
The Jakarta Post over the weekend, adding that the recovery rate
of the loans would likely stand at around 15 percent, as against
the agency's target of about 30 percent.

IBRA received more than Rp 200 trillion worth of NPLs from
ailing banks in the late 1990s. The agency is tasked to
restructure the loans and sell them to raise cash to help finance
the state budget deficit.

This year, the agency is targeted to raise more than Rp 35
trillion in cash to help plug the 2002 state budget deficit,
estimated at more than Rp 42 trillion or 2.5 percent of gross
domestic product.

Banking analyst Mirza Adityaswara has hailed the program as a
breakthrough, saying that IBRA had no other choice than to
include the unrestructured loan assets in the sale program if it
wants to save them from further deterioration.

"The ideal way is indeed to restructure all the assets first
before selling them, but it has been proven to be ineffective so
far, so why not do it this way?" he said, pointing out that past
restructuring efforts had proven to be costly and very time
consuming, while the sale of restructured loans only turned out
to generate low recovery.

IBRA said that the loans to be disposed were owed by some
2,500 debtors with various loan sizes, comprising loans of Rp 5
billion to Rp 50 billion, loans of more than Rp 50 billion, and
those of more than Rp 750 billion.

The last two category of loans are owed by large
conglomerates. The agency has yet to disclose which giant loans
are to be included in the program, but said earlier that loans
owed by huge business groups like the Texmaco Group, the Tirtamas
Group and the Barito Group would be excluded from the program.

The International Monetary Fund (IMF), which is sponsoring the
country's economic reform program, first insisted that IBRA sell
the loans in packages to attract foreign buyers.

But IBRA chairman Syarifuddin Temenggung rejected the idea,
saying that selling the loans in packages would generate a very
low recovery of around 8 percent to 10 percent as evident in
other crisis-hit countries in the region.

IBRA is planning to sell the loans on an individual basis, and
is optimistic that it can generate a high rate of recovery on the
back of high demand from local investors. It will sell the loans
via a direct sale mechanism and tender process.

Although the sale program is designed to be open to any
investors, both local and foreign, IBRA has prohibited the
original debtors from buying back the assets.

Those who buy the assets may not be affiliated to the debtors
and must sign a non-conflict of interest statement.

But another IBRA official said that the agency would adopt the
IMF strategy if its own strategy proved ineffective in the first
three months.

Meanwhile, an analyst with a state bank doubted whether the
agency had the capacity to manage such a massive asset sale
program.

The agency has been criticized in the past for slow progress
in the disposal of assets.