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PNM still stuck with Bakrie
A state financing and investment firm is still struggling to recoup its funds in repo products linked to the Bakrie Group of companies
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A state financing and investment firm is still struggling to recoup its funds in repo products linked to the Bakrie Group of companies.
PT Permodalan Nasional Madani (PNM), via its unit PT PNM Investment Management, made repo transactions, originally worth Rp 1.2 trillion (US$106 million), with PT Bakrie Capital Indonesia, a shareholder of PT Bakrie & Brothers.
“Around Rp 700 billion worth of the repos linked to the Bakrie companies, which matured in January, are still unsettled. However, they have committed to settle the debts including interest payments as soon as possible,” PNM Investment Management director Tjatur Heri Priyono told reporters Tuesday.
Tjatur said Bakrie Group had pledged to settle these problems by the end of this year, with payments to be made in cash and in several installments.
A repo, or repurchasing agreement, is a borrowing mechanism in which debtors put up securities, which can be shareholder stakes in companies, as collateral to creditors, but undertake to purchase them back later on.
It is an established transaction and normal practice in other countries which are backed by appropriate regulations. However in Indonesia, the risks inherent in such a scheme came to light and resulted in some severe problems for Bakrie & Brothers and for others involved in these transactions.
The repo scheme technique was massively used to raise funds but resulted in serious financial problems when the value of shareholder stakes, which had been put up as collateral, plummeted during the October market collapse, forcing Bakrie & Brothers to turn to partners to help settle debts.
The repo purchased by PNM had been collateralized with shares in coal producer PT Bumi Resources and Bakrie & Brothers, an investment holding of the politically wired Bakrie family.
The Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) has said it could not get involved in the problem because the repo transaction was made in a bilateral deal between PNM and Bakrie, outside of the market.
With an asset worth of around Rp 2.3 trillion as of last year, PNM has a loan portfolio of around Rp 7 trillion, mostly to small and medium companies engaged in specific sectors, including fisheries, according to Tjatur.
This year, Tjatur said, the company had earmarked Rp 1.5 trillion in new loans to the micro sector.
State Minister of State Enterprises Sofyan Djalil said earlier that the PNM repo problem was likely to be settled as the Bakrie Group of companies had assured him they would pay, but would need some time to gather cash.
He also said the ministry had not officially recommended PNM to take any necessary legal action yet to settle the problem as it was still able to manage without this. (fmb)
