Bank Mandiri wants indemnity for BII acquisition<\/p>\n
JAKARTA (JP): State Bank Mandiri said it was asking the
\ngovernment for indemnity to protect the bank against potential
\nlosses, such as from bad loans, arising after the acquisition of
\nPT Bank Internasional Indonesia (BII).<\/p>\n
Bank Mandiri chief financial officer K. Keat Lee said the
\nindemnity would cover potential losses that were not detected
\nduring the due diligence on BII.<\/p>\n
\"We have raised the issue of representative warranties and
\nindemnities. That is something we need to sort through before we
\nclose a deal,\" Lee told The Jakarta Post on Friday.<\/p>\n
He said Bank Mandiri was in negotiation with the government
\nfor the acquisition of BII, including the indeminity.<\/p>\n
As BII is already 56.7 percent owned by the government, the
\nnegotiation was more an internal talk of the government, he said.<\/p>\n
\"But we want it to be as commercial as possible,\" Lee said.<\/p>\n
Bank Mandiri plans to acquire BII, in what many believe is a
\ngovernment initiative to save the latter from liquidation.<\/p>\n
BII's non-performing loans are almost certain to become
\nunmanageable, due to a debt moratorium worth US$1 billion by one
\nof its debtors.<\/p>\n
Under the acquisition plan, BII will transfer the bad loans to
\nthe government, and then become a subsidiary of Bank Mandiri.<\/p>\n
To this end, Bank Mandiri is conducting a due diligence on BII
\nthat it hopes to complete in two months time.<\/p>\n
\"What is existing on BII's balance sheet may not be properly
\nclassified,\" Lee said.<\/p>\n
He did not rule out the possibility of the due diligence
\ndiscovering new bad loans.<\/p>\n
BII is a unit of the financially troubled Sinar Mas Group,
\nwhose subsidiary, the Singapore-based Asia Pulp and Paper (APP),
\nhas imposed a payment standstill on debts worth some $13 billion.<\/p>\n
More than half of BII's credit portfolio has exposure in the
\nSinar Mas Group, that sums up to about $1.2 billion.<\/p>\n
The government has agreed to replace the Sinar Mas bad loans
\nwith government bonds, and restructure loans from the Indonesian
\nBank Restructuring Agency (IBRA).<\/p>\n
A two months due diligence, however, may not be enough to
\nunravel the web of loans channeled to the various units of the
\nSinar Mas Group.<\/p>\n
Bank Mandiri's request for indemnity may also prove to come in
\nhandy, as reports surfaced that BII faces legal charges worth
\nRp 482.46 billion (about $43.46 million) in penalty.<\/p>\n
Copies of court documents, dated Dec. 26, 2000 and made
\navailable to the Post, showed the Central Jakarta Commercial
\nCourt ordering BII pay out the Rp 482.46 billion in penalty to a
\nlocal mining company.<\/p>\n
The legal dispute centers on charges that BII has foiled an
\ninvestment deal of the local coal mining company, PT Bentala Coal
\nMining.<\/p>\n
Last year, BII filed for bankruptcy against several companies
\nand individuals who had agreed to become guarantors for loans
\nbeing sought by the mining company.<\/p>\n
The bankruptcy case, which was filed while Bentala was
\nnegotiating with its creditors, prompted the creditors to refuse
\nsigning a loan agreement, fearing their loans would have no
\nguarantors, according to the mining company.<\/p>\n
Even though BII later lost the bankruptcy case, the creditors
\nstill refused to sign the loan agreement.<\/p>\n
Bentala said the failed investment led to losses of Rp 977.06
\nbillion and $50,000.<\/p>\n
In seeking compensation, Bentala brought BII to court,
\nreasoning the bank had, at that time, no authority to file a
\nbankruptcy case.<\/p>\n
BII, which had then been taken over by IBRA, should have
\nsurrendered the case to the agency, Bentala's lawyer Hendra Roza
\nPutra explained.<\/p>\n
He added he had informed the government and Bank Mandiri of
\nthe case, knowing that Bank Mandiri planed to acquire BII.<\/p>\n
BII had appealed the case at the higher court, but no verdict
\nhad been issued so far, according to the bank's lawyer Benny
\nHarman.<\/p>\n
Thus far, BII's officials have failed to respond to interview
\nrequests.<\/p>\n
Lee declined to comment on the case, saying he preferred to
\nwait for the results from the due diligence process.(bkm)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bank-mandiri-wants-indemnity-for-bii-acquisition-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}