IBRA says no to Bank Lippo rights issue plan<\/p>\n
Sari P. Setiogi
\nDadan Wijaksana
\nThe Jakarta Post
\nJakarta<\/p>\n
The Indonesian Bank Restructuring Agency (IBRA) said that it
\nwould not approve Bank Lippo's plan to launch a rights issue
\nuntil an independent audit of the bank's assets had been
\ncompleted.<\/p>\n
IBRA deputy chairman for bank restructuring I Nyoman Sender
\nadded there was suspicion that the deterioration in the bank's
\ncapital was part of maneuvers by its former owner to regain
\ncontrol of the bank.<\/p>\n
\"No, no rights issue for Lippo. The assets of the bank is
\nstill under appraisal to determine the real value of the assets,\"
\nhe told The Jakarta Post in a telephone interview last week.<\/p>\n
There has been reports that Bank Lippo is planning to launch a
\nrights issue or issue new shares to raise cash to help improve
\nits capital condition.<\/p>\n
The bank's capital adequacy ratio (CAR) has dropped to around
\n4 percent, way below the minimum 8 percent requirement set by the
\ncentral bank. CAR is a comparison between a bank's capital with
\nits risk-weighted assets.<\/p>\n
The management -- which have been accused of acting on behalf
\nof the Bank Lippo founder, the Riyadi family -- has said that
\nthe bank's capital had gone down because it had to provide close
\nto Rp 1 trillion to cover the rapid depletion in value of the
\nbank's foreclosed assets.<\/p>\n
The assets refer to some Rp 2.7 trillion in mainly property
\nassets the bank seized from debtors who defaulted on their loans
\nbefore it was recapitalized in 1999.<\/p>\n
There is no clear reason why the value of the property assets
\ndropped.<\/p>\n
Nyoman said an independent appraisal was underway to review
\nthe value of the bank's foreclosed assets.<\/p>\n
IBRA currently controls the publicly-listed Bank Lippo.<\/p>\n
The government agency recapitalized Bank Lippo in 1999 through
\na rights issue, using Rp 7.2 trillion worth of state funds to
\npurchase the bank's shares at a price tag of around Rp 260 per
\nshare.<\/p>\n
In return, IBRA gained a 59 percent stake in the bank, cutting
\nthe ownership of the old owner -- which was represented by PT
\nLippo.Net -- to 8.1 percent, with the remaining shares in the
\nhands of public investors.<\/p>\n
Since the cash-strapped government has no money to purchase
\nthe new shares when Bank Lippo launches the rights issue plan,
\nIBRA's stake in the bank would be diluted, while PT Lippo.Net
\ncould purchase the shares and allow Lippo.Net to increase
\nownership in the bank at a cheaper cost.<\/p>\n
The government would also face strong criticism if it
\npurchases the new Bank Lippo shares as this would mean a second
\nbank recapitalization program and a greater burden on taxpayers.<\/p>\n
Bank Lippo shares are currently around Rp 235 per share. But
\nthis seemingly high share price was a result of a 1 for 10
\nreverse stock split late last year.<\/p>\n
In reality, the shares dropped 40 percent in 2002.<\/p>\n
Investors shunned Bank Lippo after the bank reported a net
\nloss of Rp 1.27 trillion for the first nine months of 2002.<\/p>\n
But the report is controversial as the bank published a nine-
\nmonth net profit of Rp 99 billion in the mass media in November.<\/p>\n
The bank's management has said that the two different
\nfinancial reports were due to different treatment with regards to
\nthe sharp decline in the value of the foreclosed assets. In the
\nfirst report published in the media, the decline in the value of
\nassets had not been obtained.<\/p>\n
This case has prompted the Capital Market Supervisory Body
\n(Bapepam) to investigate the bank for giving misleading
\ninformation. If proven guilty, the bank's board of directors
\ncould face up to 10 years imprisonment.<\/p>",
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