Bank Niaga ready for recapitalization step

Bank Niaga ready for recapitalization step

JAKARTA (JP): The publicly-listed Bank Niaga said on Thursday
it would conduct a rights issue next month to raise funds to
finance its recapitalization plan.

Vice president Arwin Rasyid said on Thursday that the bank may
need some Rp 3 trillion (US$400 million) in order to boost its
capital adequacy ratio (CAR) to the stipulated minimum level of 4
percent.

Under the government's recapitalization program, Bank Niaga
shareholders would provide at least 20 percent of the
recapitalization funds, or about Rp 600 billion. The government
will provide up to 80 percent of the funding.

Arwin admitted that securing the 20 percent funding
requirement amid the current economic hardship and political
uncertainty would be a tough job.

"Foreign investors will only come in after the general
election," he told reporters at a press conference after the
bank's extraordinary shareholders meeting.

He added, however, that the exact amount of the financing
requirement would be made public after the central bank gives
final approval to its business plan.

"We're completing the revised version of the business plan,
and we expect Bank Indonesia to give its approval soon," he said.

The government is requiring all of the country's commercial
banks to have minimum CAR levels of 4 percent. The
recapitalization process has to be completed by the end of March.

The government is to help recapitalize banks with a CAR of
between less than 4 percent and minus 25 percent.

Bank Niaga is reported to have a CAR level of minus 17.36
percent.

CAR is the ratio between risk-weighted assets and equity
capital.

Thursday's shareholders meeting approved the appointment of
five new commissioners and one director following a major change
in share ownership after the Harawi Sekawan Group, a business arm
of the country's largest Muslim organization, Nahdlatul Ulama,
took a majority stake.

Another tough job for Bank Niaga's management is to win a
US$50 million derivative transaction dispute with publicly-listed
property developer PT Suryamas Duta Makmur.

The South Jakarta District Court ordered Bank Niaga in
December, last year, to pay $60 million to Suryamas because of
the bank's failure to comply with $100 million commitment in a
currency futures contract signed in 1997 before the rupiah
tumbled against the dollar.

Bank Niaga lodged an appeal with the Jakarta High Court
recently, insisting that it was Suryamas which had not paid back
a $50 million loan dating from July 1997 through a derivative
transaction scheme. The loan matured on July 20 last year.

"I'm optimistic that we'll get fair treatment and win the
case," Arwin said, pointing out that Suryamas had acknowledged
its obligation to Bank Niaga as stipulated in the developer's
annual report. (rei)