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)