Mandiri cancels plan to seek overseas loans

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.