BII obtains shareholders' approval to launch rights issue

BII obtains shareholders' approval to launch rights issue

Dadan Wijaksana, The Jakarta Post, Jakarta

Publicly-listed Bank Internasional Indonesia (BII) obtained
shareholders' approval on Tuesday to launch a rights issue to
raise Rp 4.81 trillion (US$552.87 million) to strengthen its
capital.

Sigit Pramono, head of BII's management team, said the move
would boost the ailing bank's capital adequacy ratio (CAR) to 14
percent, compared to the minus 47 percent it recorded at the end
of last year.

The central bank has required all banks to have a minimum CAR
level of 8 percent. CAR is the ratio between capital and risk-
weighted assets.

"All preparations are close to finalization and we're
optimistic of the success of the (rights issue) plan as the
government will act as a standby-buyer," Sigit told reporters.

The rights issue, which means issuing new shares to raise
capital, is expected to be completed in July.

As a standby-buyer, the government must purchase the new
shares offered should if fail to attract investors.

The government, represented by the Indonesian Bank
Restructuring Agency (IBRA), now controls around 75 percent of
the bank in return for trillions of rupiah worth of
recapitalization bonds it has injected since it was taken over in
1999.

The government first injected bonds worth Rp 6.6 trillion in
1999 to boost its CAR level to beyond the minimum 4 percent
requirement at the time.

Up till now, the government has injected some Rp 21 trillion
worth of bonds whose interest rate is covered by the already
strained state budget.

Under the rights issue plan, if minority shareholders do not
purchase the new shares, their stakes in BII would be diluted
from the current 25 percent ownership. But the government's
ownership will increase to around 86 percent.

IBRA has said that prior to the issuance of new shares, the
bank would also have to implement a "reverse stock" measure to
increase the stock's price to a minimum level of Rp 100 per share
so as to meet requirements of the Capital Market Supervisory
Agency (Bapepam).

The Bapepam ruling stipulates that a publicly listed company
can only launch a rights issue if its share price is valued at
least Rp 100 per share.

BII's share price is currently hovering at Rp 20 per share.

Sigit said that after the completion of the plan, the bank
would then focus on restructuring its non-performing loans
(NPLs), amounting to Rp 5.2 trillion as of last year, or about 60
percent of its total loans.

"With the planned debt restructuring, we aim to reach a less
than 10 percent of NPLs by the end of the year," he said.

Sigit said that by the end of the year the bank's CAR was
expected to reach around 20 percent.