IBRA to offer 25% debt haircut, lower dollar rate

IBRA to offer 25% debt haircut, lower dollar rate

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA)
plans to offer indebted state enterprises a 25 percent reduction
on their debt principals, and private corporate debtors a lower
dollar rate to prompt them to settle their debts this year.

IBRA chairman I Putu Gede Ary Suta said on Tuesday the offer
was valid for the 44 state firms which owed debts to the agency.

"It is hoped this incentive will help speed up the debt
restructuring of state firms," Ary Suta told legislators during a
hearing with the House of Representatives Commission II, which
oversees home and legal affairs.

He added that only state firms that were wholly owned by the
government were entitled to receive this incentive.

"The debts must be legitimate debts, not fictional ones," he
said, but fell short of specifying how much in debts the state
firms owed to IBRA.

Ary Suta also said IBRA also planned to offer private firms a
lower dollar exchange rate for the repayment of foreign debts,
contingent upon the prompt resolution of their liabilities.

"The corporate debtors willing to settle their debts through
cash payments will be entitled to pay at Rp 7,800 to the dollar,"
he said.

The rupiah closed on Tuesday at Rp 11,300 to the dollar. The
revised state budget assumes an average rupiah rate of Rp 9,600
to the dollar for the year, lower than the original assumption of
Rp 7,800 adopted in January.

"By offering the two sweeteners we hope to reap some US$1.1
billion in debt repayments this year," Ary Suta continued.

But he added that he must yet to obtain the approval of the
Financial Sector Policy Committee (FSPC) for his plan.

The FSPC groups senior economics ministers and has the final
say on IBRA's major bank and corporate restructuring programs.

"So far the FSPC's response has been good, and the finance
minister agreed to my proposal," he said.

Ary Suta's proposal came after Minister of Finance Rizal Ramli
instructed IBRA to raise its revenue target above the Rp 27
trillion ($2.38 billion) stipulated in the state budget.

According to Rizal, a higher target would compel IBRA to
become more creative and aggressive in raising revenue for the
state. The minister declined to specify the new revenue target.

Besides IBRA, the directorate generals of taxation and excise
duties, and state enterprises have also been ordered to hike
their revenue targets.

The planned increases in their revenue targets are simply
internal targets, and not part of the revised state budget that
has been approved by the House.

IBRA was founded in 1998, at the height of the economic
crisis, at the urging of the International Monetary Fund to take
over nonperforming assets from banks and to recapitalize banks
with government bonds.

As part of this task, IBRA also manages debtors' assets that
have been surrendered to the agency as collateral.

To date, IBRA controls some Rp 600 trillion in assets,
comprising loans and fixed assets that it must either restructure
or sell.

The government has injected local banks with bonds valued at
some Rp 430 trillion, for which it must pay interest charges in
cash.

This year alone, the government has set aside Rp 61.1 trillion
for the payment of the bonds' coupon rates.

The final amount, however, could easily surpass this figure,
as a large portion of the bonds carry coupon rates pegged to Bank
Indonesia's certificate rates, which have been rising steadily
over the past few weeks. (bkm)