FSPC approves BII rights issue plan

FSPC approves BII rights issue plan

The Jakarta Post, Jakarta

The Financial Sector Policy Committee (FSPC) approved late on
Monday the proposal of the Indonesian Bank Restructuring Agency
(IBRA) to increase the size of the bank's rights issue plan to Rp
4.33 trillion (US$466 million) from the original estimate of
around Rp 3.9 trillion.

IBRA Chairman Syafruddin Temenggung said that this was needed
to boost the ailing bank's capital adequacy ratio (CAR) to
between 8 and 12 percent.

CAR measures a bank's capital compared to its risk weighted
assets, including loans. The higher the CAR, the better the
condition that the bank is in.

Syafruddin was speaking to reporters following a meeting with
FSPC, which groups senior economic ministers and has the final
say on the country's major bank and corporate restructuring
programs.

He added that prior to the issuance of new shares, the
publicly listed 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 in order to meet the requirement 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 no less than
Rp 100 per share. BII's share price was at Rp 20 per share on
Monday.

However, the plan would still have to wait for approval from
the House of Representatives. The two are scheduled to meet later
this month.

IBRA, which controls 75 percent of the bank, had argued that
the plan is the best mechanism available to save BII.

Under the plan, the government would become a standby buyer
for the new shares using recycled bonds to finance the purchase.
Recycled bonds are government bonds which have been redeemed from
recapitalized banks.

The government through IBRA has injected about Rp 21 trillion
worth of bonds since it was nationalized in 1999. But after a
couple of years, the bank's CAR dropped again, prompting IBRA to
come up with the plan.