Bank Bali's rating affirmed

Bank Bali's rating affirmed

JAKARTA (JP): Rating agency Standard & Poor's affirmed on
Wednesday the CCC public information rating on Bank Bali
following the announcement by the Indonesian Bank Restructuring
Agency (IBRA) that the bank would be recapitalized in the last
quarter of the year.

The agency said in a statement that Bank Bali was in dire need
of capital as evidenced by its reported negative equity of Rp 1.9
trillion (US$267 million) -- equivalent to a negative 21 percent
of total assets -- as at March 31, 1999.

Under the recapitalization program, IBRA would inject Rp 4.3
trillion into the bank to raise its capital adequacy ratio (CAR)
to 4 percent in compliance with Bank Indonesia's requirement.

The Rp 4.3 trillion fund will be raised through a rights issue
with IBRA acting as underwriter.

"Despite this capital injection, the bank will remain severely
capital constrained," the agency said.

"Standard & Poor's continues to view the targeted CAR of 4
percent to be very low given the inherent high risk of the
operating environment in Indonesia," the agency added.

The agency also predicted the rights issue would receive cool
response from the public.

"While the rights issue will be made to the public, it is
likely that IBRA will ultimately take up a substantial share
given the weakened financial condition of domestic investors,"
the agency said.

On the completion of the recapitalization, IBRA may sell up to
20 percent of its stake in Bank Bali to Standard Chartered Bank
of Britain, the agency said.

Under the agreement between IBRA and Standard Chartered, the
latter is allowed to purchase the balance of IBRA's 80 percent
stake in Bank Bali after five years.

"While it is expected that the Standard Chartered Bank may
initially acquire up to 20 percent ownership of the bank, but the
final amount is uncertain and dependent on a number of external
factors," the agency said.

It said the recapitalization program would provide Bank Bali
with some flexibility to absorb anticipated losses, but
"Standards & Poor's considers the target recapitalization to be a
continuing constraining factor on the bank's operation in the
future."

Bank Bali is currently being managed by a team comprising
officials from Standard Chartered and IBRA. (jsk)