Bank Global bond holders may lose all

Bank Global bond holders may lose all

The Jakarta Post, Jakarta

Over a dozen big Bank Global Internasional bond holders, many of
them pension funds, may lose the millions they have invested if
the central bank finally decides to shut down the scandal-ridden
bank, whose managers have been accused of widespread fraud.

According to Bank Niaga, the custodian bank for the Bank
Global bonds, in a report to the Surabaya Stock Exchange as seen
on its website on Thursday, the investors may only be able to
obtain around 5 percent of the Rp 400 billion (US$44.30 million)
they invested in the bonds, but only if the government is
convinced that the bank had previously set aside about Rp 20
billion in "sinking funds" for the bond holders. The funds are
deposited at the bank.

Under the existing blanket guarantee program, the government
will guarantee time deposits and savings of all liquidated banks.
It will not, however, reimburse bond investors.

But an official at Bank Indonesia, who requested anonymity
said, that the management of Bank Global had never allocated
money into the sinking fund account.

Bank Global issued the bonds in June last year. According to
reports, some of the bond holders include state-owned pension
fund company PT Jamsostek (Rp 100 billion), and pension units of
state oil and gas firm PT Pertamina (Rp 70 billion), state
insurance firm PT Jiwasraya (Rp 6 billion), state mining firm PT
Aneka Tambang (Rp 2 billion), and the Indonesian Communion of
Churches, or PGI (Rp 1 billion).

The 10-year bond with a floating interest rate, was given an
A- rating by local rating agency PT Kasnic Kredit Rating
Indonesia.

The bonds were categorized as sub-debt notes, which meant that
investors were unsecured and would be the last to get their hands
on Bank Global assets when the authority liquidated the bank.
The government, which guaranteed normal bank deposits, will have
the first right to the assets, followed by other secured
creditors.

Bank Indonesia earlier this week temporarily suspended the
publicly listed Bank Global for a month as its financial health
condition deteriorated, with its capital adequacy ratio plunging
to minus 39 percent, compared to the central bank's minimum
requirement of 8 percent.

The central bank has alleged the main reasons for the
financial trouble are alleged examples of fictitious lending and
other bank frauds committed by the bank's management.

It is likely that when the one-month period is over, the
authority will close down the bank as there may be no new
investors willing to rescue it.

This means that Bank Global bonds will be worth no more than
toilet paper. -- Related story on Page 2