IFC says about 20% of its loans to RI firms turn bad

JAKARTA (JP): The International Finance Corporation (IFC) said here yesterday that about 20 percent of its loan and equity investment in Indonesia had turned bad as the recipients could no longer repay their debts.

IFC's director of its South and Southeast Asia department, Rashad Kaldany, said another 40 percent of the total financing was doubtful but the remaining 40 percent performed well.

Kaldany said that IFC and its cash-strapped debtors were currently working on ways to restructure and reschedule the bad debts.

"We have to make a very substantive debt restructuring program with these companies," he said at a media briefing.

He said IFC's existing investment portfolio in Indonesia reached US$971 million, comprising $485 million in loans and $486 million in equity. The loans and equity, which were mostly given to private companies, also included those arranged through syndications.

He said the Indonesian recipients comprised 42 companies, but he declined to identify them. According to the agency's 1997 investment portfolio report, the Indonesian recipients included Bakrie Kasei Pet, Indorama Synthetics, Argo Pantes and Semen Andalas Indonesia

He said IFC, an affiliate of the World Bank, was currently working on 10 restructuring and rescheduling projects with its Indonesian debtors, where two projects were close to an agreement.

"In the case of one project, the sponsors (the Indonesian borrowers) have already approached us to discuss an orderly liquidation of their business," he said.

He pointed out that IFC had no immediate intention of taking legal action despite the enactment of the bankruptcy law.

"We do not have any intention at this point of time to take any legal action yet, but if conditions deteriorate in the next few months, we might take legal action," he said.

Kaldany said that IFC was actively seeking ways to help Indonesian export-oriented firms settle their working capital requirements.

He said that Indonesia, the corporation's fifth largest exposure worldwide, remained an important country for IFC despite the worst economic crisis Indonesia has faced in decades.

He said IFC's Indonesian debtors employed over 200,000 before the crisis and the recovery of its clients would be crucial to improving the country's dire economic situation.

IFC said it would invest $14 million more in an Indonesian company, despite the country's crippling economic crisis.

In the wake of a major government announcement on banking reform, the IFC also said it would consider taking stakes in banks, adding that many foreign investors were also "looking around" for opportunities.

IFC said it has seen signs that Indonesian companies are taking steps to diversify their operations to deal with the crisis and that parts of the economy are picking up.

"So far, it appears the bottom was hit in May," Kaldany said. (aly)