IBRA told to control collateral assets of Sinar Mas Group
JAKARTA (JP): Experts urged the Indonesian Bank Restructuring Agency (IBRA) on Tuesday to get hold of the collateral assets pledged by the Sinar Mas Group in return for the government bailout of the latter's huge debt to the publicly listed Bank Internasional Indonesia (BII).
Chief research officer of Danareksa Research Institute Raden Pardede said that IBRA must make sure that it can sell the assets whenever necessary to raise cash.
"If IBRA can't sell the assets any time it wishes, it (the bailout) would become the burden of taxpayers," Raden told The Jakarta Post.
Separately, member of IBRA oversight committee Pradjoto warned that the agency should minimize the cost of the bailout to taxpayers.
"The important thing is how much cost will be borne by the state budget ... Will the cost be smaller than the benefit obtained from saving BII," Pradjoto said.
He added that the oversight committee was scheduled to meet today to discuss the issue.
"Can the debt still be restructured, and how long will Sinar Mas take to repay the debt," he added, citing other questions related to the bailout.
The government has issued more than Rp 430 trillion (US$46 billion) worth of bonds to finance the country's bank recapitalization program. The state budget covers the interest expense of the bonds.
IBRA Chairman Edwin Gerungan said on Monday that the agency had reached a deal with Sinar Mas to settle about Rp 13.7 trillion (US$1.3 billion) of its debt to BII, a move seen as saving the bank from the risk of closure.
Edwin said that according to the deal, the Sinar Mas debt would be removed from BII's books so the bank's capital adequacy ratio (CAR) will increase from 6.8 percent to more than 10 percent.
The government has said that all banks must have a minimum CAR of 8 percent by the end of this year or risk closure.
Edwin did not provide details, but Finance Minister Prijadi Praptosuhardjo said that the government was considering issuing bonds to be injected into BII's balance sheet to replace the loans transferred to IBRA.
Meanwhile, IBRA senior official Dasa Sutantio said on Tuesday that the agency had not yet decided whether it should hold ownership in the assets Sinar Mas would pledge as collateral.
"The detailed structure of the settlement is yet to be completed. Whether the government will have ownership (in the collateral assets) we can't say yet," Dasa said.
Sinar Mas had earlier agreed to pledge assets equal to 145 percent of its debt to BII as a counter-guarantee. The assets include the group's ownership in several publicly listed firms and non-listed companies.
The government has also earlier agreed to extend the repayment period of the debt from September 30, 2002 to September 20, 2003.
BII was founded by Sinar Mas, but the government now owns a controlling stake in the bank after the government financed the bank's recapitalization program in 1999.
Sinar Mas had used BII's money to finance various projects of the group, thereby violating the legal lending limits with regard to connected lending.
Sinar Mas's New-York listed Asia Pulp & Paper also owes some $10 billion in foreign debt, and some $2 billion will mature in 2001.
Dasa said that the government would not bailout the Sinar Mas foreign debt.
Elsewhere, Raden criticized the government for not having a clear standard operating procedure in the restructuring of the country's corporate and banking sector.
He said that the government had not anticipated problems but merely reacted to them as they emerged.
"It's just like a fireman, only taking action when there's a fire. But there are still many problems that may come from the banking sector, and if the government doesn't anticipate them, the water needed to put out the fire will be costly because of limited resources," Raden warned. (rei)