Bank Lippo recapitalization contract questioned

Bank Lippo recapitalization contract questioned

Zakki Hakim, The Jakarta Post, Jakarta

A May 2000 agreement that allows Bank Lippo's former owner to
repurchase shares in the bank from the Indonesian Bank
Restructuring Agency (IBRA) has the potential to cause the state
massive losses, a legal expert said.

Law expert Sutan Remy Sjahdeini told The Jakarta Post on
Thursday that all signatories to the deal could be charged for
corruption according to the Anticorruption Law.

The central bank is currently investigating an alleged scam
committed by Bank Lippo management. Previous reports alleged that
the bank's management had made maneuvers that were against the
law in a bid to help the former owner regain control of the bank
for a very low price at the expense of the state.

Remy was referring to an amendment of the Investment and
Performance Agreement (IMPA), which is a contract between IBRA
and publicly listed Bank Lippo, when the government injected some
Rp 6 trillion (about US$ 675 million) worth of bonds in 1999 to
recapitalize the bank.

Under the second amendment of the IMPA, the former owner of
the bank is obliged to purchase IBRA's shares in the bank upon
the agency's request. Within four years after the amendment was
signed, the total value of shares to be purchased amount to Rp
300 billion.

But Remy said that the amended contract did not specify the
price of the shares.

This apparently tempted the bank's former owner to attempt to
make the market price of the shares decrease in order to regain
control of the bank at a very low price, he added.

"This would cause the state to suffer financial losses," he
said.

IBRA, which represents the government, now controls a 59
percent stake in Bank Lippo as a result of the government
privatization program.

Remy urged the agency to explain to the public why it had
agreed to the amended version of the IMPA.

But IBRA spokesman Rohan Hafas rejected the charges, saying
that IBRA would not request Bank Lippo's former owner to exercise
the put option policy if the price was not right.

"Yes, the former owners may buy back Lippo shares but only if
the price is right, so there won't be any losses to the state,"
he told the Post.