Mandiri cancels plan to seek overseas loans

Rendi A. Witular, The Jakarta Post, Jakarta

State-owned Bank Mandiri, the country's largest bank in terms of assets, has canceled plans to seek bilateral lending from foreign banks to help refinance its maturing debts this year, as the bank's internal cash flow has been deemed sufficient for paying the debts.

Mandiri president director E.C.W. Neloe said there was not much chance that the bank would seek refinancing from banks or other external financing sources this year, and would instead use internal cash to refinance the maturing debts.

"There are several foreign banks that have approached us to offer the loans. However, after further consideration we have decided not to accept them until this year. It would be more efficient to pay them off with our own cash," said Neloe on Thursday.

Neloe did not mention the amount of the available liquidity currently held by Mandiri, but based on its first half financial report, the bank recorded a net profit of Rp 3.1 trillion (some US$330 million) with assets valued at Rp 234.7 trillion.

As previously reported, Mandiri has to service its maturing debts, which total between $300 million and $400 million this year. The initial plan was to refinance the debt by issuing bonds worth at least $150 million or seek lending from overseas banks.

Regarding the bank's non-performing loans in several companies, Neloe said there was progress in the efforts to recover the loans.

Neloe said the bank was expecting to recoup some of its money this year from ailing retailer Pasaraya by selling the company's building in Manggarai, Central Jakarta, which is worth an estimated Rp 190 billion.

Pasaraya, which is owned by tycoon Abdul Latief, has around Rp 400 billion in bad loans to a group of banks, one of those being Bank Mandiri.

"The selling of the building is expected to reduce the debt burden of Pasaraya and make the retailer more focused in running its main retail business in the Blok M area," said Neloe.

Aside from Pasaraya, Mandiri also expects to be able to recover its troubled loans from pulp and paper producer PT Kiani Kertas by improving the company's business operation and easing requirements for new investor, Novela International, in injecting working capital into Kiani.

The capital is needed to help revive Kiani's business so that it can pay its debts to Mandiri.

Neloe said the bank might allow Novela to inject only $30 million into Kiani from the previous plan of $50 million, due to Novela's difficulties in meeting the requirement. However, the new requirement could not be applied unless Mandiri was certain that there was sufficient capital in Kiani.

"We expect to settle the problems in Kiani this month or in the first week of next month. We hope the company can get its business back to running at full operation and start paying off the debts," said Neloe.

Mandiri became a creditor of Kiani after the bank purchased the debt of the company from the now defunct Indonesian Bank Restructuring Agency in 2001.

Due primarily to Kiani's bad loans, Mandiri's gross non- performing loans ratio rose to 8.4 percent from 6.6 percent as of the first quarter of this year as the bank had to set aside a huge provision to cover the bad assets.

Mandiri shares ended higher by Rp 50 to Rp 1,575 on the Jakarta Stock Exchange on Thursday.

Elsewhere, Neloe also said that Mandiri planned to inject working capital for shrimp farmers under the management of PT Dipasena Citra Darmaja, Southeast Asia's largest shrimp-farming company.

Neloe refused to disclose the amount of the loan, however, he said last year that Mandiri had made plans to lend some Rp 500 billion for the farmers.