Government cuts back BCA stake for sale to 30%

Berni K Moestafa, The Jakarta Post, Jakarta

The government said it would sell only a 30 percent stake in PT Bank Central Asia (BCA) by year's end, instead of the 51 percent as promised to the International Monetary Fund (IMF), marking a decision that could again irritate the IMF.

The Indonesian Bank Restructuring Agency (IBRA), which is in charge of the sale, said on Tuesday it would sell the 30 percent stake through a private placement this year.

IBRA has decided to postpone the sale of the other 21 percent, pending subsequent market developments, said agency chairman I Putu Gede Ary Suta.

"IBRA will first sell the 30 percent through a private placement, and the other 21 percent we will discuss with the buyers of the first stake," Ary Suta told a press meeting.

Also attending the meeting was State Minister for State Enterprises Development, Laksamana Sukardi.

Neither he nor Ary Suta explained the reasons for delaying the sales.

Under the IMF's recent lending agreement, known as the Letter of Intent (LoI), the government agreed to sell a 51 percent stake in BCA by the end of this year.

"The GOI (Government of Indonesia) is discussing with the legislature its intention of offering a further 51 percent (of its stake in BCA) for sale to a strategic partner by year-end," the LoI said.

Last year, the government sold a 22.5 percent stake in BCA through an initial public offering followed by another 10 percent in a secondary offering last July.

IBRA was supposed to finalize the sale of a 30 percent stake through a private placement shortly after the secondary offering.

But Ary Suta said the tender process attracted only two bidders, neither of whom were willing to pay a premium price for BCA.

The government, he said, should have offered a majority stake to entice more and higher bidders.

But legislators then suggested a two-step sales strategy that offered the buyer of the first 30 percent a put option deal to secure the remaining 21 percent later on.

Under a put option deal, the government has the right to sell the other 21 percent stake at a price the buyer must accept.

But analysts warned that offering a put option deal would deter investors already skittish over the government's poor track record in honoring contracts.

They referred to cases like Mexican-based cement company Cemex SA de CV, whose put option deal to buy PT Semen Gresik is still in limbo after a three-year wait.

Laksamana also said earlier that by law the government was not bound by legislators' demands concerning asset sales.

Last year, legislators blocked the sale of BCA for fear of meager bids due to the then unfavorable market conditions.

The move led the IMF to suspend its loan program, which it only reactivated last August after an eight-month-long delay.