IBRA told to control collateral assets of Sinar Mas Group
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)