Lippo drops controversial asset sale plan<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
Shareholders of publicly listed Bank Lippo decided on Monday to
\nannul an earlier November decision to approve a proposed sale of
\nforeclosed assets, worth about Rp 2.5 trillion (US$289 million).<\/p>\n
Bank Lippo president Joseph Luhukay, however, did not provide
\na clear reason for the decision.<\/p>\n
He only said that any sales of the assets, mostly in the form
\nof properties, should first have the approval of the central bank
\nand not reduce the bank's capital.<\/p>\n
"If we want to sell foreclosed assets, we should follow the
\nregulations of the central bank and conduct the process
\ncautiously to avoid disturbing our capital adequacy ratio (CAR),"
\nhe said, referring to the ratio between a bank's capital and its
\nrisk-weighted assets.<\/p>\n
The planned sale of the foreclosed assets became a controversy
\nlate last year as it was deemed part of a maneuver by the bank's
\nformer owner to regain control of the bank at a cheaper price,
\nthus causing losses to the state.<\/p>\n
The bank's previous management proposed the sale of the assets
\nand it was approved by the previous board of commissioners. But
\nsome suspected that the assets would be sold to people linked to
\nthe bank's former owner at a very cheap price.<\/p>\n
The accusation was based on the fact that the bank only gave
\nbidders a little time to conduct a proper due diligence process.<\/p>\n
The bank claimed that selling the assets would cause its CAR
\nto go down to about 4 percent, way below the central bank's
\nminimum CAR requirement of 8 percent.<\/p>\n
This would in turn prompt the bank to launch a rights issue to
\nraise cash to boost its CAR. Since the cash-strapped government,
\nwhich owns a 57 percent stake in the bank, has no money to
\nexercise its rights, the former bank owner will have huge
\nopportunities to inject cash and regain control of the bank.<\/p>\n
The government became the majority owner of the bank after it
\ninjected a massive amount of bonds to help recapitalize the bank.<\/p>\n
But following extensive criticism from the media, the
\ngovernment, via the Indonesian Bank Restructuring Agency (IBRA),
\nfired the previous management team and assembled a new one.<\/p>\n
The authorities are still in the process of investigating the
\nalleged financial scandal.<\/p>",
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