IBRA's asset sales
IBRA's asset sales
The Indonesian Bank Restructuring Agency (IBRA), hard-pressed
to raise at least US$5.1 billion (Rp 36 trillion) by December for
the state budget, has of late been flaunting its asset disposal
plans covering equities in going companies, bad loans and
properties spread throughout the country. This is all part of
about Rp 600 trillion (book value) worth of assets taken over by
the agency from state banks and closed, nationalized and
recapitalized banks.
The agency announced detailed plans to sell within this year
equities in at least 20 companies, including Bank Central Asia
(BCA), and a good portion of 1,105 properties, or bank offices,
and some of the Rp 220 trillion worth of bad loans it now
manages.
The plans, which appear well-prepared, do not, however,
impress anyone who is familiar with the agency's shoddy deals
over the past year. In fact, IBRA may fall behind its target of
raising Rp 17 trillion in the current fiscal year ending later
this month. The agency had collected only Rp 10.5 trillion as of
early this month, and the only major source of possible revenue
until the end of the fiscal year is the sale of its 40 percent
equity in PT Astra International, which is expected to bring in
about Rp 3 trillion.
While South Korea and Thailand have been enjoying strong
recovery due to the massive return of foreign direct investment,
mainly through asset acquisition, Indonesia remains mired in a
slump. South Korea, for example, has been working really hard to
put out the welcome mat for foreign investors. It got $15.5
billion in foreign direct investment last year, or twice as much
as that in 1998, mainly through asset sales.
As the rupiah exchange rate to the dollar is still more than
66 percent lower than it was at the beginning of the economic
crisis in mid-1997, IBRA, which holds a huge amount of assets,
was supposed to be a one-stop service for foreign investors. But
instead of becoming a paradise for deals, IBRA has often been
seen as a labyrinth that confuses investors combing through the
rubble of assets in its holding.
Standard Chartered Bank of Britain, the first foreign investor
seriously committed to acquiring a local bank, became so
frustrated with the process of its deal with IBRA for equity
investment in Bank Bali that it abruptly quit the transaction
last year. An American investor consortium led by Newbridge
Capital/Global Equity also got burned in their bid to buy IBRA's
40 percent stake in Astra International in January. Though this
consortium still joined the second round of bids, the bitter
experience adversely affected IBRA's reputation in deal-making.
IBRA announced last month another setback in its plan to sell
BCA, saying that the bank's initial public offering could not be
launched as scheduled in March due to technicalities.
What makes things even more disappointing is that the reasons
behind the thwarted deals were not the prices or sense of
nationalism, as many had feared, but IBRA's clumsiness in
identifying, documenting and sorting out the bad loans and other
assets it now manages. One would understand that since IBRA was
set up during the peak of the crisis in January 1998, and served
as a dumping ground for ailing banks, the assets it took over
were neither clearly identified nor properly documented. But
still the whole process should not have taken more than a year to
complete.
Because IBRA is one of the major sources of revenue for the
state budget -- it is tasked to raise almost Rp 19 trillion
between April and December alone -- the agency should have placed
top priority in sorting out and processing all the documents
related to the acquisition. Only then could it package the assets
into easily saleable forms and adequately schedule their sales to
achieve maximum value.
A proper documenting process will become even more imperative
now as IBRA will soon begin selling the 1,105 properties and
smaller sizes of bad loans it took over from closed banks.
Selling properties with incomplete legal titles and poorly
documented loans will not only lead the agency into a messy
litigation process, but also scare away the few remaining
investors still interested in IBRA assets.
The Indonesian Bank Restructuring Agency (IBRA), hard-pressed
to raise at least US$5.1 billion (Rp 36 trillion) by December for
the state budget, has of late been flaunting its asset disposal
plans covering equities in going companies, bad loans and
properties spread throughout the country. This is all part of
about Rp 600 trillion (book value) worth of assets taken over by
the agency from state banks and closed, nationalized and
recapitalized banks.
The agency announced detailed plans to sell within this year
equities in at least 20 companies, including Bank Central Asia
(BCA), and a good portion of 1,105 properties, or bank offices,
and some of the Rp 220 trillion worth of bad loans it now
manages.
The plans, which appear well-prepared, do not, however,
impress anyone who is familiar with the agency's shoddy deals
over the past year. In fact, IBRA may fall behind its target of
raising Rp 17 trillion in the current fiscal year ending later
this month. The agency had collected only Rp 10.5 trillion as of
early this month, and the only major source of possible revenue
until the end of the fiscal year is the sale of its 40 percent
equity in PT Astra International, which is expected to bring in
about Rp 3 trillion.
While South Korea and Thailand have been enjoying strong
recovery due to the massive return of foreign direct investment,
mainly through asset acquisition, Indonesia remains mired in a
slump. South Korea, for example, has been working really hard to
put out the welcome mat for foreign investors. It got $15.5
billion in foreign direct investment last year, or twice as much
as that in 1998, mainly through asset sales.
As the rupiah exchange rate to the dollar is still more than
66 percent lower than it was at the beginning of the economic
crisis in mid-1997, IBRA, which holds a huge amount of assets,
was supposed to be a one-stop service for foreign investors. But
instead of becoming a paradise for deals, IBRA has often been
seen as a labyrinth that confuses investors combing through the
rubble of assets in its holding.
Standard Chartered Bank of Britain, the first foreign investor
seriously committed to acquiring a local bank, became so
frustrated with the process of its deal with IBRA for equity
investment in Bank Bali that it abruptly quit the transaction
last year. An American investor consortium led by Newbridge
Capital/Global Equity also got burned in their bid to buy IBRA's
40 percent stake in Astra International in January. Though this
consortium still joined the second round of bids, the bitter
experience adversely affected IBRA's reputation in deal-making.
IBRA announced last month another setback in its plan to sell
BCA, saying that the bank's initial public offering could not be
launched as scheduled in March due to technicalities.
What makes things even more disappointing is that the reasons
behind the thwarted deals were not the prices or sense of
nationalism, as many had feared, but IBRA's clumsiness in
identifying, documenting and sorting out the bad loans and other
assets it now manages. One would understand that since IBRA was
set up during the peak of the crisis in January 1998, and served
as a dumping ground for ailing banks, the assets it took over
were neither clearly identified nor properly documented. But
still the whole process should not have taken more than a year to
complete.
Because IBRA is one of the major sources of revenue for the
state budget -- it is tasked to raise almost Rp 19 trillion
between April and December alone -- the agency should have placed
top priority in sorting out and processing all the documents
related to the acquisition. Only then could it package the assets
into easily saleable forms and adequately schedule their sales to
achieve maximum value.
A proper documenting process will become even more imperative
now as IBRA will soon begin selling the 1,105 properties and
smaller sizes of bad loans it took over from closed banks.
Selling properties with incomplete legal titles and poorly
documented loans will not only lead the agency into a messy
litigation process, but also scare away the few remaining
investors still interested in IBRA assets.