Govt to own 95% of Bank Danamon

JAKARTA (JP): The government has taken control of a 95 percent stake in the publicly-listed Bank Danamon following a debt-for- equity agreement struck on Thursday.

The Indonesian Bank Restructuring Agency (IBRA) said in a press release that Bank Indonesia liquidity support given to Bank Danamon would be converted into government equity in the bank.

The agency added that Bank Danamon's shareholders had agreed to the proposal.

The central bank injected a total of Rp 25.2 trillion (US$2.8 billion) in emergency loans to Bank Danamon to help it meet massive withdrawals from panicked depositors. The government then nationalized the bank, which was among the country's largest private banks, in August.

Under IBRA's proposal, Bank Danamon will issue the government with new shares in lieu of the liquidity support, giving it a 95 percent stake in the bank. The former majority owner, property mogul Usman Admajaja, and the public will be left with only a 5 percent stake.

The new shares will also be listed on the Jakarta Stock Exchange and will carry the same voting and dividend rights as other shares in the bank, the agency added.

Bank Danamon and 13 other commercial banks were given one year to return a total of more than Rp 141 trillion in Bank Indonesia liquidity support which they have received.

If the loans are repaid, former owners will have the right to redeem their ownership of the banks.

The government has pledged that it will not hold onto nationalized banks in perpetuity. It has also said that new investors will be allowed to take control of banks if former owners fail to repay their debt and improve capital adequacy ratios to a minimum of 4 percent, a condition which all banks must meet by the end of this year. (rei)