Mandiri mulls loans from foreign banks
Rendi A. Witular, The Jakarta Post, Jakarta
State-owned Bank Mandiri, the country's largest bank by assets, plans to seek bilateral lending from foreign banks to help refinance its maturing debts this year following a decision to drop plans to raise the required funds on overseas bond markets.
Mandiri vice president director I Wayan Pugeg said the bank was likely to seek debt refinancing facilities from foreign banks such as the London-based Hongkong and Shanghai Banking Corporation Ltd. (HSBC).
"We would prefer to seek bilateral financing for our debts. Currently, we are still studying proposals from several banks, mostly foreign banks, such as HSBC," said Pugeg after a seminar on Wednesday.
Pugeg said Mandiri had to service a maturing debt totaling between US$300 million and $400 million this year, with the initial plan being to refinance it by issuing bonds worth at least $150 million.
He explained that bonds would now be Mandiri's last resort due to concerns over a possible increase in the global interest rate environment, which could create a heavier burden for the bank and would likely be opposed by the central bank.
Regarding Mandiri's bad loans in ailing state-owned airline PT Merpati Nusantara Airline, Pugeg said the bank was not willing to convert the debts into equity unless other key creditors, such as the government and state-owned flag carrier PT Garuda Indonesia, agreed to do the same.
Merpati's debts to Mandiri stand at about Rp 220 billion (US$24.5 million).
At a separate event, Mandiri president director E.C.W. Neloe said the bank had urged Merpati to revise its business plan in order for to allow creditors to gain maximum benefit from the proposed debt to equity conversion.
"They have to improve their business plan, such as seeking out more profitable routes, boosting operating efficiency and improving the professionalism of management and staff. We are currently still studying the feasibility of the conversion plan," said Neloe.
Aside from Merpati, Mandiri also has massive bad loans in publicly listed food and beverage company PT Suba Indah and in pulp and paper company PT Kiani Kertas, amounting to around Rp 300 billion and Rp 1.76 trillion respectively.
Neloe said that in the case of Suba Indah, Mandiri would try to reschedule the repayment of the debt principal in order to give the company a chance to revive its business so as to enable it to repay its debt.
"Suba still has prospects as it remains committed to making interest payments. We'll just have to give them a grace period," said Neloe without elaborating further.
As for Kiani, the bank is currently having problems with commitments made by Kiani's new investor, Novela International, to inject some $50 million of badly needed working capital into the company. The capital is needed to help revive Kiani's business so that it can pay its debts to Mandiri.
"We will meet with Kiani management next week to discuss the pledged working capital. Novela has thus far injected $15 million into Kiani, but is having problem now paying the remaining $35 million. They said they would settle the matter in December," said Neloe.
Due primarily to the Kiani 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 bought the Kiani loans from the now-defunct Indonesian Bank Restructuring Agency in 2001.
Mandiri shares ended higher by Rp 100 at Rp 1,575 on the Jakarta Stock Exchange on Wednesday.