Bank Mandiri cancels plan to acquire ailing BII<\/p>\n
Tantri Yuliandini, The Jakarta Post, Jakarta<\/p>\n
The government decided to drop earlier plans to merge state-
\nowned Bank Mandiri with publicly listed Bank Internasional
\nIndonesia (BII) citing improvement in the latter's financial
\ncondition.<\/p>\n
State Minister for State Enterprises Laksamana Sukardi said on
\nTuesday that BII had been considered \"healthy\" after the
\ngovernment injected billions of dollars worth of hedge bonds
\nearlier this month to replace bad loans owed by the bank's parent
\nSinar Mas Group.<\/p>\n
\"Our final decision is to make BII a stand-alone bank,\" he
\ntold a media conference.<\/p>\n
He added that the new strategy was part of the government's
\nplan to gain optimum results from divesting ownership in BII
\nlater on.<\/p>\n
Laksamana's office oversees the Indonesian Bank Restructuring
\nAgency (IBRA), which controls majority ownership in BII after it
\nfinanced the bank's recapitalization program in the wake of the
\n1997 financial crisis.<\/p>\n
The measure is part of the government's latest bank
\nrestructuring program.<\/p>\n
Laksamana said to ensure that BII could meet the central
\nbank's year-end minimum 8 percent capital adequacy ratio (CAR)
\nrequirement, the government would inject another Rp 2 trillion to
\nRp 3 trillion worth of bonds into the bank.<\/p>\n
In a bid to save the ailing BII, the previous economics team
\nhad planned to merge the bank with Bank Mandiri by asking the
\nlatter to acquire the former.<\/p>\n
But the new economics team instead injected US$1.05 billion
\nand Rp 5 trillion ($472.8 million) in hedge bonds to clean up the
\nbank's bad loans and transferred them to IBRA.<\/p>\n
The loan transfer was made following concern that BII's CAR
\nwould plunge on the high possibility of the Sinar Mas loans
\nturning bad.<\/p>\n
Several analysts have earlier criticized the plan to force
\nBank Mandiri to acquire BII arguing that the state-owned bank
\nitself was not in good condition.<\/p>\n
Bank Mandiri had also recently expressed worries that the long
\nand difficult process of the planned acquisition of BII would
\ncause a delay in the state bank's initial public offering plan.<\/p>\n
Bank Mandiri president E.C.W. Neloe said that his bank's top
\npriority was to launch an IPO, not acquiring BII.<\/p>\n
Neloe could not be reach for comment on the government's
\nlatest decision.<\/p>",
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