State bank debtors to be taken to court

State bank debtors to be taken to court

JAKARTA (JP): The president of newly established Bank Mandiri,
Robby Djohan, said on Wednesday some 5 percent of the Rp 61
trillion (about US$7.6 billion) in nonperforming loans at four
state banks could not be restructured because the debtors'
businesses were no longer viable.

He said Bank Mandiri, which will take over the four state
banks, would have no choice but take the debtors to the
bankruptcy court.

"Many of the debts will be liquidated, but many more will be
restructured," he said at the 70th birthday celebration of tycoon
Mochtar Riady.

"Some 95 percent (of the problem loans) will be restructured.
The IMF has approved the banks' business plans," he said.

The four state banks are Bank Bumi Daya, Bank Pembangunan
Indonesia, Bank Dagang Negara and Bank Ekspor Impor Indonesia.

The government established Bank Mandiri last year for the
purpose of acquiring the four banks in two years time. The four
banks will be legally merged in June this year.

Robby said restructuring the debts would help revive the
businesses' of the debtors, which would contribute to the effort
to restore the country's overall real sector and economy.

"Many of the debtors have been in business for 30 to 40
years," he said.

The International Monetary Fund, which is organizing a bailout
package for Indonesia, has allowed state banks to design
restructuring strategies for their problem loans.

However, the Fund ruled that the banks' nonperforming loans
had to be handed over to the Indonesian Bank Restructuring Agency
(IBRA).

Last month IBRA assumed over Rp 100 trillion in bad loans from
the country's seven state banks.

The four banks under Bank Mandiri have nonperforming loans
amounting to some Rp 60 trillion.

The IMF has pressured the government to reach immediately a
restructuring agreement with the 20 largest debtors at the state
banks or begin litigation against the debtors.

The government initially promised the IMF it would reach a
restructuring agreement with the debtors or begin foreclosures on
April 30.

The deadline was extended to Aug. 30, raising speculation that
well-connected debtors were being protected.

However, IBRA announced last week it would return to the state
banks nonperforming loans of less than Rp 25 billion.

Tycoon Sudwikatmono, one of the debtors, said on Wednesday he
had already met with IBRA officials to hammer out a restructuring
plan for his indebted companies.

"But there are still several things which we have not agreed
upon," he said.

He said he asked IBRA to extend the payment period of the
debts from five years to 10 years and to provide a debt reduction
facility.

Sudwikatmono, the brother-in-law of former president Soeharto,
expects a restructuring agreement will be reached before the Aug.
30 deadline.

He said his companies owed the equivalent of $225 million to
state banks. (rei)