IBRA to sell loans worth Rp 150 trillion

The Jakarta Post, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) announced on Tuesday that it would launch next month the sale of bank loans with a total book value of between Rp 130 trillion and Rp 150 trillion (US$16.57 billion).

IBRA deputy chairman Mohammad Syahrial said the loans were owed by some 2,500 debtors.

He added that the loans included those owed by large debtors with individual loan sizes of more than Rp 50 billion.

The agency took over more than Rp 200 trillion worth of non- performing loans from ailing banks in the wake of the 1998 financial crisis.

IBRA is tasked with restructuring the loans and selling them to the market to raise cash to help finance the state budget deficit. For this year, the agency has targeted the raising of more than Rp 35 trillion.

Syahrial said that the loans to be sold included those which had not been restructured.

The agency has been criticized for the slow progress made thus far in the restructuring and sale of the bank loans.

IBRA is also mandated to redeem some Rp 10 trillion worth of government bonds from the banking sector to help reduce the burden on the state budget. The agency is expected to swap the restructured loans for bonds held by the banking sector.

The government issued around Rp 430 trillion worth of bonds to help finance the recapitalization of several ailing banks. The state budget covers the interest on the bonds.

So far, the agency has not started the loan-to-bond swap program.

Several banks, however, have said that they would not be interested in exchanging the bonds for the IBRA loans because of the high risk factor associated with the loans, unless the agency agreed to sell them at a large discount.

Reuters quoted Syahrial as saying that the recovery rate from the loan sale would likely be about a fifth of the total book value.

Syahrial said the agency hoped to achieve a recovery rate of 22 percent from the loan sale.