Bank Mandiri gets Rp 103t in bonds for recapitalization
Bank Mandiri gets Rp 103t in bonds for recapitalization
JAKARTA (JP): The government issued on Thursday Rp 103
trillion (about US$13.7 billion) worth of bonds to recapitalize
state Bank Mandiri, the country's largest bank.
The Ministry of Finance said in a statement this amount
represented the first tranche of recapitalization funds to be
injected into the bank.
The ministry said the second and final recapitalization
tranche would be issued in December, following the completion of
a due diligence audit of the bank to determine the amount of this
final tranche. The audit is expected to be finished sometime in
November.
"It has been agreed that this (final) tranche will be based on
a due diligence audit conducted by independent third-party
auditors.
"Along with the issuance of the first tranche of bonds, the
government has signed an interim investment and management
performance agreement with the board of directors and board of
commissioners of Bank Mandiri," the ministry said.
"This agreement contains various conditions which must be
fulfilled over the next two months by the management of Bank
Mandiri," it said, adding that a final management contract would
be drawn up when the agreement on the final recapitalization
tranche was signed.
Bank Mandiri was formed late in July last year from the merger
of four ailing state banks: Bank Bumi Daya, Bank Ekspor Impor,
Bank Pembangunan Indonesia and Bank Dagang Negara. These banks
had a combined loss of Rp 117 trillion last year.
Based on an earlier due diligence audit, the government
initially decided to inject Rp 137.8 trillion into Bank Mandiri
to raise its capital adequacy ratio (CAR) to the government-
established 4 percent minimum.
However, due to faltering economic conditions the sum required
to raise the bank's CAR to 4 percent may have increased.
World Bank country director for Indonesia Mark Baird
criticized the government on Thursday for the sluggish pace of
recapitalization of state banks.
He urged the new government to accelerate the program,
pointing out that state banks currently carried some 75 percent
of the banking industry's liabilities.
Under an agreement with the International Monetary Fund, the
government was to begin recapitalizing Bank Mandiri at the end of
July.
Economists also have demanded the government be more
transparent in recapitalizing state banks.
"Why is the cost of recapitalizing state banks so large? What
are their business plans? We demand the government be transparent
about this," noted economist Sri Mulyani said.
The government so far has provided limited information about
the performances of the four state banks which were merged to
form Bank Mandiri.
Bank Mandiri has passed some Rp 76 trillion in bad loans from
the four state banks to the Indonesian Bank Restructuring Agency.
This figure represents around 50 percent of the banks' total
loans.
Bank Mandiri president Robby Djohan said recently that some Rp
10 trillion to Rp 15 trillion of the bad debts were owed by the
family and associates of former president Soeharto.
The bank is currently attempting to restructure some Rp 51
trillion in problem loans, and hopes to complete the
restructuring of some 28 percent of this total by the end of this
year.
Robby said he planned to float Bank Mandiri shares on the
stock market in 2001. He said this would be accomplished by
offering up to 80 percent of the bank's shares in a bid to make
the bank completely independent of the government and raise
proceeds to help finance the government's bank restructuring
program, which is estimated to cost Rp 550 trillion, or about 50
percent of gross domestic product for 1999.
Bank Mandiri is expected to control 30 percent of the domestic
market share. (rei)