Govt targets Rp 6.2 trillion from BII divestment

The Jakarta Post, Jakarta

The government is targeting some Rp 6.29 trillion (about US$630 million) from the sale of its majority stake in the publicly listed Bank Internasional Indonesia (BII) at the end of this year.

A document from the Indonesian Bank Restructuring Agency (IBRA), a copy of which was made publicly available, showed IBRA planning to sell BII after first raising its stake in the bank to 85 percent from 57 percent through a right issue in June.

The right issue will shore up BII's narrow capital adequacy ratio (CAR) to the minimum required level of 8 percent - a necessary move to bring the bank into better financial health ahead of its planned divestment process.

"Based on early estimates, the cost of improving BII's health to reach an 8 percent CAR will amount to Rp 3.97 trillion," the document said.

The proceeds of Rp 6.29 trillion assumed a price of Rp 25 for each of BII's 252 billion shares, it said.

Early this month, IBRA sold a 51 percent stake in one of its top banks, Bank Central Asia (BCA), for approximately Rp 5.3 trillion.

Selling BII will help recoup some of the taxpayer money spent to prevent the bank from collapsing.

In 1999, IBRA injected some Rp 6.6 trillion to acquire a 57 percent stake in BII to replace bad loans the agency assumed.

Last year, the agency assumed another Rp 14.4 trillion in loans from BII-affiliated Sinar Mas Group that were at risk of turning sour.

Overall, the cost of bailing out BII would hit Rp 24.97 trillion once the right issue was completed.

But letting the bank collapse is not an option as it would set the government back to the tune of some Rp 53 trillion, mostly to pay back BII's customers under the government's blanket guarantee scheme for bank deposits.