Govt agrees to recapitalize Bank Bali

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)