Bank Global bond holders may lose all their money
The Jakarta Post, Jakarta
More 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