Govt issues bonds to recapitalize Danamon, BNI

Govt issues bonds to recapitalize Danamon, BNI

JAKARTA (JP): The government issued on Friday bonds worth Rp
60.66 trillion (US$6.97 billion) to finance the second
recapitalization of publicly listed Bank Danamon and Bank Negara
Indonesia (BNI).

The Indonesian Bank Restructuring Agency (IBRA) said in a
statement late last week that Rp 28.72 trillion worth of bonds
were injected into Bank Danamon in order to maintain a positive
capital adequacy ratio (CAR) after the incorporation of eight
smaller banks into Bank Danamon.

IBRA said that the second recapitalization of Bank Danamon
also marked the legal merger between Danamon and the eight banks.

"This is in line with the government's commitment, as stated
in the letter of intent (loi)," IBRA said.

According to the loi, signed in May, the merger and the second
recapitalization of Bank Danamon must be completed by the end of
June.

The agency said that the operational merger with the eight
banks would be gradually completed in early October.

IBRA said that in the first stage, Danamon would be merged
with Bank Jaya, to be followed by Bank Tiara, Bank Pos, Bank
Rama, Bank Nusa Nasional and Bank Duta, and finally with Bank
Risjad Salim Internasional.

The government nationalized Bank Danamon in 1998 and the eight
banks in 1999 because their former owners could not provide
financing to recapitalize the banks.

The government recapitalized Bank Danamon in March 1999,
sending its CAR to beyond 4 percent, much higher than the minimum
4 percent requirement for this year.

IBRA said that the CAR of Bank Danamon after the legal merger
would reach 32.5 percent.

Bank Bali

Separately, the Ministry of Finance said in a statement that
some Rp 31.79 trillion worth of bonds had been injected into BNI
to complete its recapitalization program.

The statement said that this was also in line with the
government's commitment in the loi.

The government injected some Rp 30 trillion worth of bonds
into BNI in April to recapitalize the bank.

With the completion of the recapitalization of Bank Danamon
and Bank BNI, the government has nearly completed its overall
bank recapitalization program.

The only bank which has yet to be recapitalized is Bank Bali.

Earlier last week, the House of Representatives declined to
approve the government's proposal to recapitalize Bank Bali at a
cost of Rp 4.99 trillion until a legal dispute with the former
owner and CEO of the bank, Rudy Ramli, has been settled.

IBRA and Bank Indonesia nationalized Bank Bali last year on
the grounds that the Ramli family failed to come up with the
necessary cash requirement to finance the recapitalization of the
bank.

But Rudy filed a lawsuit against the nationalization measure,
and, surprisingly, the Jakarta Administrative Court decided in
favor of Rudy.

IBRA and the central bank have since launched an appeal, which
is still being processed.

The government and Bank Indonesia are also seeking an out of
court settlement.

The government will have to wait until September before it can
proceed with the recapitalization program of Bank Bali, again
because a new financial audit has to be completed.

The government said that each month of delay would increase
the recapitalization cost of Bank Bali by about Rp 40 billion.

Minister of Finance Bambang Sudibyo said last week that
closing down the bank was also an option.(rei)