Wed, 23 Jul 2003

IBRA won't cut prices of loan assets

The Jakarta Post, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) said on Tuesday it would not lower the floor prices of its Rp 40 trillion (US$4.87 billion) worth of assets which failed to interest buyers during an earlier sale.

IBRA deputy chairman Mohammad Syahrial said that the agency wanted to ensure a respectable recovery rate from the assets.

"There will be no cuts in the floor prices. It's okay if there are no buyers for the assets, we will not lower the prices, because they are already low," he was quoted by as saying.

He said that the particular assets would be included in the sale of another group of assets, scheduled to start next week.

He added that investors would be given a longer due diligence period of up to 45 days.

He said that one reason for the low bids submitted by investors during the earlier asset sale program was because of the relatively shorter due diligence period.

IBRA launched the sale of the Rp 40 trillion worth of assets in May. When six bidders submitted their final bids on Monday, it turned out that all were below the floor prices set by the agency.

The assets are in the form of non-performing loans and fixed assets including shares of four of IBRA's large debtors namely Texmaco Group, Petrochemical giant PT Chandra Asri, PT Bakrie Nirwana Resort and PT Rajawali III Sugar Factory.

Six investors which managed to submit final bids in the first program were Chinkara Capital and Glazers & Putnam Investment ltd. (Chandra Asri), Goal Tarding Assets Ltd. and PT Bahana Sarana (Bakrie Nirwana Resort), Mandari Consortium and Bapindo Consortium (Rajawali III Sugar Factory).

IBRA has said that it would welcome investors involved in the first program to rebid for the assets, although re-registration would be required.

IBRA was established in 1998 to restructure and sell more than Rp 400 trillion in bad loans it took over from local banks after the government bailed them out amid the 1997-1998 Asian financial crisis.

The proceeds from the asset sale were to be used to help finance the state budget deficit, which this year is estimated to reach Rp 34.4 trillion. The agency is hoping to raise around Rp 18 trillion in cash this year.