Govt agrees to recapitalize Bank Bali

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) and Bank Indonesia finally reached an out of court settlement with the former owner of Bank Bali, the Ramli family, paving the way for the government to recapitalize the publicly listed bank.

IBRA senior deputy chairman Arwin Rasyid said late on Monday that the new agreement would be reported to the Financial Sector Policy Committee (FSPC) on Thursday, and the government was expected to meet with the House of Representatives on Friday to seek approval for the recapitalization of Bank Bali.

FSPC groups several senior economic ministers and is headed by the Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie.

"IBRA, Bank Indonesia, and Rudy Ramli have reached an out of court settlement," Arwin told a press conference following hours of negotiation.

Rudy Ramli is the former CEO and owner of Bank Bali.

Arwin said that the government had also agreed to provide Rudy with some Rp 9 billion (US$1 million) in compensation for the "losses" he had suffered after his bank was nationalized by the government last year.

He said that the country's Capital Market Supervisory Agency (Bapepam) would freeze the voting rights of Deustche Bourse Clearing (DBC) AG at the upcoming rights issue of Bank Bali to be held to facilitate the recapitalization process.

He added that Bapepam would continue its investigation to disclose the investors in DBC, a German-based investment firm.

DBC is believed to have amassed around 50 percent of shares in Bank Bali, but the investors in the investment firm and their intention have not been known.

Rudy had earlier made these demands as a condition for him to drop his legal suit.

Bank Indonesia transferred Bank Bali to IBRA last year after its owner failed to come up with the necessary 20 percent cash requirement to help finance the recapitalization of the bank. IBRA then subsequently nationalized the bank.

But Rudy filed a legal suit, and the Jakarta Administrative Court surprisingly ruled in favor of Rudy. IBRA and BI then made an appeal.

The House had demanded the government first settle its legal dispute with the Ramli family as a precondition for the approval of the bank's recapitalization program.

But the FSPC made a surprising move last Thursday, ordering IBRA to annul its earlier decision to nationalize Bank Bali and to transfer the bank back into the hands of Bank Indonesia, a move which would likely end in the liquidation of the bank.

FSPC secretary Safruddin Tumenggung denied on Monday that the move was a "threat" to Rudy to immediately reach an out of court settlement.

Safruddin said that from the start, the "spirit" of the FSPC was to recapitalize Bank Bali, but last week's development was not conducive in allowing the recapitalization program to proceed.

He, however, said that developments on Monday were very positive.

Arwin said that the cost of recapitalizing Bank Bali would increase from the initial estimate of Rp 4.9 trillion to more than Rp 5 trillion.

"The exact figure would still have to be calculated," he said.

The government initially planned to recapitalize Bank Bali at the latest by the end of June at a cost of Rp 4.9 trillion, but the legal dispute had prevented the government from proceeding with the plan.

The government has said that each month of delays would inflate the recapitalization cost by between Rp 40 billion and Rp 70 billion.

Arwin said that the government would be a standby buyer of the rights issue of Bank Bali.

The government would purchase up to 100 percent of the rights issue, if no investors exercise their rights. The government will inject bonds into the bank to finance the program.

Arwin said that Rudy would still be allowed to repurchase the bank when IBRA launched its divestment program in Bank Bali.

Rudy declined to provide much comment, but said that he would try to find a foreign investor for Bank Bali.

Bank Bali has total assets of around Rp 7 trillion and some 6,000 employees. The bank was one of the country's best performing banks before the financial crisis hit the country in the middle of 1997.(rei)