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)