Mandiri settles Kiani debt restructuring
Rendi A. Witular, The Jakarta Post, Jakarta
State Bank Mandiri, the nation's largest bank in terms of assets, has ended lengthy negotiations over the settlement of its massive loans in troubled pulp and paper producer, PT Kiani Kertas, after both agreed to sign a restructuring agreement.
Bank Mandiri president director ECW Neloe said on Wednesday the bank had just signed a restructuring deal on Dec. 27 with Kiani after the firm's new investor, Singapore-registered Novela International, had injected US$50 million in working capital into the firm to improve its business operations.
The capital is needed to help revive Kiani's business so that it can pay its $201 million debt to Mandiri.
"The restructuring deal has been signed. We are now waiting for Kiani to improve its performance and start paying its debt to us. Otherwise, we will seize their assets," said Neloe.
He added that the restructuring agreement included an extension of three years for Kiani to settle its entire debt to Mandiri, with an interest of 6.5 percent annually. The deal would also allow Kiani to pay the entire principal on the last year of the deal.
"Normally restructuring takes about five years, not three years. We have proposed to the central bank for a possible extension for Kiani to restructure in order to give them some time to improve its performance," he said.
Due primarily to Kiani's bad loans, Mandiri's gross non- performing loans (NPL) ratio remains high at 7.2 percent as of September last year, compared to the central bank's 5 percent limit.
Neloe said if Kiani failed to pay its debt by the given deadline, Bank Mandiri would ask the company to sell its assets, or to authorize the bank to sell them to cover the debt.
At present, the bank is still auditing Kiani assets, which are estimated to be valued at about Rp 3 trillion.
Bank Mandiri was ordered by the now-defunct Indonesian Bank Restructuring Agency (IBRA) in 2002 to team up with Prabowo Subianto, former son-in-law of former president Soeharto, to take over Kiani's debts. Kiani was once controlled by tycoon Mohammad "Bob" Hasan, a crony of Soeharto.
Neloe also said that the bank was planning to allocate some Rp 2.7 trillion (US$300 million), or about 15 percent of the bank's Rp 18 trillion lending expansion for this year, to help finance the construction of infrastructure for the business community.
The government will form a consortium, consisting of state banks, to help channel loans to finance the construction of 1,500 kilometers of toll roads that would link Merak in Banten with Banyuwangi in East Java.
The toll roads are expected to help prevent massive transportation congestion in 2008, which disrupts the distribution chain of goods in Java.
The government is expected to construct some 300 kilometers of toll roads per year, with an annual investment as high as Rp 30 trillion.