Tue, Jul 01, 2003 - Page 11 News List

Kaoshiung deal offers hope for bad-loan sell-off

By Joyce Huang  /  STAFF REPORTER

After recovering NT$8.23 billion (US$238 million) from Kaohsiung Business Bank's (高雄企銀) NT$21.7 billion-worth bad loans, the government plans to hold another auction before the middle of September to sell off the troubled bank.

"So far, at least three local financial institutions have expressed interest in acquiring the bank," said Johnson Chen (陳戰勝), president of Central Deposit Insurance Corp (CDIC, 中央存保), the custodian of the bank since January last year.

The lender, which operates 44 branches nationwide, has about NT$80 billion in its saving accounts and about NT$40 billion in remaining assets after writing off NT$21.7 billion in impaired assets.

Chen made the comment yesterday morning at a ceremony where the Texas-based Lone Star Asia-Pacific Ltd inked a deal to buy the Kaohsiung bank's bad loans.

The Lone Star deal achieved a 37.8 percent recovery rate in bad loans, which is relatively higher than the averaged 20 percent to 25 percent rate of similar deals.

"It means that the local economy has gradually warmed up to boost selling prices of these bad loans," Chen said.

Lauding the CDIC's success in writing off Kaohsiung Bank's bad loans, Minister of Finance Lin Chuan (林全) yesterday said that the bidding has set a good example for the government to deal with for other failed banks.

"The model, based on the principle of market mechanism, attracted several enthusiastic competitors," Lin said.

This is the first time the government has succeeded in separating a troubled bank's bad assets from its good assets in order to sell them. The government plans to hold an auction of the bank's remaining operations, assets and liabilities, after obtaining approval from lawmakers in the next legislative session.

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