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.