Salim agrees to pledge more assets to IBRA

Salim agrees to pledge more assets to IBRA

Dow Jones, Jakarta

The Salim Group, formerly Indonesia's richest business conglomerate, agreed to pledge more assets to the Indonesian Bank Restructuring Agency if the proceeds from sales of the assets that it has already pledged to the agency fall short of its debts to the government, IBRA Chairman Syafruddin Temenggung said Thursday.

The Salim group owes 53.2 trillion rupiah (US$5.8 billion) to the government after the government bailed out PT Bank Central Asia, which was ravaged by the 1997 Asian financial crisis. BCA was Salim's financial crown jewel before the government took over the bank in 1998.

Salim has pledged over 100 companies to IBRA to repay the debts. However, there are concerns among legislators that the sales of those assets won't generate the required Rp 53.2 trillion because the value of the assets has been declining sharply since Salim pledged them in 1998.

The Indonesian parliament has pushed IBRA to seek more assets from Salim to meet the shortfall.

IBRA has also found out that the value of the companies that Salim had pledged to it was lower than the value it had represented to the agency. IBRA calculated the difference was Rp 960 billion, which Salim must pay in cash. Salim has paid Rp 230 billion of this so far.

Syafruddin said the Salim group has agreed to complete the repayment of the remaining Rp 730 billion by the middle of October.

IBRA was established in January 1998 to restructure ailing domestic banks and recover around Rp 600 trillion of funds the government has spent to bailout local banks.