BII plans rights issue to fund its acquisition

JAKARTA (JP): Bank Internasional Indonesia (BII) is planning a rights issue to enable state-owned Bank Mandiri to acquire the financially troubled banking unit of the Sinar Mas group, BII's new management said Monday.

Cholil Hasan, coordinator of the newly appointed BII management team, said the bank would launch a rights issue after Bank Mandiri completed its due diligence on the bank.

"The due diligence process is expected to be completed within two months," Cholil told reporters during a media briefing on the bank's acquisition plan on Monday.

The government announced the planned acquisition of BII by Bank Mandiri late last month.

The central bank transferred on Friday the supervision of the bank to the Indonesian Bank Restructuring Agency (IBRA) following worries that its holding company, Sinar Mas, might fail to pay $65 million in interest falling due on June 30.

The transfer would allow IBRA to take over Sinar Mas's debt from BII, paving the way for the acquisition of BII by Bank Mandiri.

Sinar Mas owes $1.3 billion to BII and IBRA has agreed to guarantee the debt under a complex restructuring scheme reached with the group earlier this year.

In return, the indebted group has pledged fixed assets to the agency worth at least 145 percent of its BII debt.

Under the acquisition plan, the agency is also to take over Sinar Mas's loans and restructure them outside the bank.

Cholil said the proceeds from the rights issue would boost BII's capital adequacy ratio (CAR), which was nine percent as of last month.

It is feared that the bank's CAR will drop once Sinar Mas defaults on its debt.

Indonesian banks are required to reach a year-end minimum CAR of eight percent as part of the government's measures to keep the country's banking industry healthy.

During the gathering, Cholil also announced IBRA's decision to replace the old BII management with a new management team.

Cholil, who is former senior vice president of Bank Mandiri's international banking division, chairs the new management team with three of the former members of BII's board of directors, Halim Susanto, Fransiska Oei, and Rudy N.Hamdani, as members.

Also named as member of the team was Gunawan Setiawan.

"IBRA has also named an oversight team with Rusli Prakarsa from Bank Indonesia as coordinator of supervision and Hiroshi Tadano from BII, Anthony Elam from IBRA, and Keat Lee from Bank Mandiri as members," he said.

Both teams would ensure that customer deposits in BII would remain safe, Cholil said.

"The operation of BII will continue as normal," Cholil said, adding that the teams were committed to boosting the bank's services to its customers. ((03/bkm)