Mandiri settles Kiani debt restructuring
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.