i
special
WHAT'S NewS Issue 4 April 1998
9
Paul Beiboer, head
ofjakarta's
corporate batiking
the faet that some people have
retained so much integrity and
dignity in the face of crisis.
There are corporates who are
still doing quite well. For
example, those who have local
currency costs and forex
income. I've heard trom
colleagues in other banks that
these solvent customers are
saying they can't pay, using the
recession as an excuse. There
are also people who decide not
to pay their banks because
they know we have little legal
recourse. On the other hand,
there are people who do their
utmost to meet their
commitments. Even though
you know these are very, very
tough times for them, they still
manage to service their
obligations. That kind of
Thailand
cliënt, that's what motivates
me.'
DIRT CHEAP
Given the restraints on action,
the negotiatory approach is
clearly the preferred course of
action. 'When we start talking
to a customer about how to
tackle problems, the first thing
you have to do is create some
form of transparency,' says
Ban Aik. 'In the past, people in
countries with a dollar peg
were reluctant to hedge. They
couldn't see the need for it
because they couldn't imagine
their currency falling against
the dollar. They were in a
strong position and with sound
growth figures, hedging and
transparency were the last
things on their - or their
Bangkok
Malaysia
banks' - minds. There was a
period about a year ago that
we realized Japanese and
Western banks were literally
throwing money at customers.
They were offering dirt cheap
finance without security. I
think one of the reasons our
portfolio is in relatively good
shape is because we didn't do
that. We feit this avalanche of
cheap money couldn't go on
indefinitely. But no one was
predicting the severity of the
crash when it came.'
WORKING CAPITAL
Going in to piek up the pieces
wherever possible means first
discovering whether the
customer's business is viable,
whether it can survive. 'We
have to know what caused the
problems,' says Ban Aik. 'Was
it the devaluation? The
domestic banking crisis which
has crippled many corporates
who would otherwise still be
very successful operations? Or
something else? Many of the
clients we are supporting have
their capital lines cut by
primary relationship banks.' It
would be easy here to say that
these customers have been
deserted by their banks - the
reality is that the financial
institutions are themselves
bankrupt to all intents and
purposes and have no
credibility in the market. 'We
have clients with full export
order books for the next 12
months,' confirms Ban Aik.
'They are unable to get
working capital to issue L/Cs
for raw materials purchase, so
their whole operation is
coming to a standstill.'
EQUAL MISERY
But there are dangers in
stepping into the breach. 'You
have to be very careful before
helping out customers with,
say, an existing insolvency
problem,' Ban Aik continues.
'We have one customer for
whom we're a member of the
steering committee on
restructuring. This cliënt has a
substantial order book. It
needs USD 10 million for raw
material purchases. There are
38 banks in the creditor
committee. I said last night:
guys, we have to have equal
misery. We all have to cough
up a share of the finance this
company needs to help solve
its problems. Do you know,
there were a few that refused
to put in the USD 300,000. We
talked it back and forth and
still there was no unanimous
consent.'
NEW MONEY
Ban Aik understands all too
well the hesitance of some of
the other banks. 'People are
wary of throwing good money
after bad, especially in
countries like Thailand where
the law says that anyone
putting new money into an
insolvent company will be
repaid after all other creditors.
It makes people very cautious.
In Indonesia, there is the
constant fear of a moratorium,
so that adds to the lack of
credibility as well. But we are
doing our best - both for our
customers and the bank.' The
fact that we are doing our best
could earn us more than
expected long-term kudos with
customers in the region. As we
talked with Ban Aik and his
people, Singapore's prime
minister Goh Chok Tong was
warning that 'Asia may rethink
its relations with the West
unless the US and Europe can
convince the region they are
providing adequate assistance
to countries suffering from the
present economie crisis. A lot
depends on how the countries
here perceive the help given by
western countries.'
INDONESIAN
FUNDAMENTALS
In the midst of paralyzing
economie crisis, corporate
Indonesia's lack of
transparency is not making
support or assistance any
easier. 'In a way, banks only
have themselves to blame,'
says Paul Beiboer in Jakarta.
'When things were great, and
they were great, bankers were
very easy going about things
they normally are very
cautious about - I'm talking
financial statements,
covenants, structures, that
kind of thing. In a sense, banks
have a real responsibility here.
