IBRA to swap more than Rp 20t loans for bonds

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) expects to swap next year between Rp 20-30 trillion (US$2.41 billion) in performing bank loans for government bank- recapitalization bonds to reduce interest costs.

IBRA deputy chairman Arwin Rasyid said on Tuesday that the swap policy was crucial to reduce the state's obligations for the treasury bonds.

"Next year, we expect the swap bonds worth Rp 20 trillion to 30 trillion. This is a preliminary figure, but it will be significant" he told reporters on the sidelines of a meeting between Finance Minister Prijadi Praptosuhardjo and the House of Representatives budget committee.

"The bond swap is an important breakthrough to reduce the burden of the interest payments," he added.

The plan for the bond swap was first announced by former finance minister Bambang Sudibyo in July.

Arwin said that IBRA was still making preparations but expected the policy could be implemented next year.

The government has issued some Rp 405.9 trillion worth of bonds to help finance the recapitalization of the country's ailing banks. The government is expected to issue another Rp 18.3 trillion bonds soon to complete the recapitalization program.

Some of the bonds carry a fixed interest rate of between 12 percent and 14 percent, but the largest portion of the bonds carry a variable interest rate linked to the interest of Bank Indonesia SBI promissory notes currently hovering above 13 percent.

In the current state budget, the interest costs for recapitalization bonds are estimated at Rp 38 trillion.

The interest cost in 2001 is expected to soar to Rp 56.3 trillion, an increase of almost 50 percent.

Half of the interest costs of the bonds this year will be financed by IBRA, which has been tasked with raising some Rp 18.9 trillion through the sale of its assets.

The agency is targeted to raise Rp 25-30 trillion in 2001.

IBRA is managing more than Rp 250 trillion worth of non- performing loans (NPLs) transferred from closed and recapitalized banks.

The agency is responsible to recover or restructure the NPLs.

Under the bond swap mechanism, NPLs which have been restructured and are now performing (current) loans would be swapped for bank recapitalization bonds.

Elsewhere, Arwin said that the agency would work hard to meet its target of Rp 18.9 trillion this year.

He said that so far the agency had raised about Rp 9.5 trillion.

He said that the remainder would come from the sale of various companies surrendered by former bank owners and from the recovery of non-performing loans.

He said that IBRA's ownership in publicly listed Bank Central Asia and Bank Niaga would be divested soon, raising between Rp 1.5 trillion and Rp. 2.0 trillion in cash. (rei)