IBRA hits another snag in Astra deal

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) deal to sell its 40 percent stake in PT Astra International to American investors has hit another snag after the country's securities watchdog diluted the agency's voting right.

The Capital Market Supervisory Agency (Bapepam) has notified IBRA that the agency cannot exercise its voting right at Astra's extraordinary general meeting of shareholders, which is scheduled for Feb. 8, to nullify decisions made by a shareholders meeting last March to make a rights issue and sell non-core assets.

"IBRA cannot vote on these two items on the agenda on the grounds that it is a conflict of interest," an informed source at Bapepam confirmed on Thursday.

Other sources close to the deal said this restriction might impinge on the deal between IBRA and Newbridge/Gilbert because the closing of their transaction was partly contingent on the agency's success in deferring Astra's rights issue and sales of non-core assets.

IBRA, under tremendous pressure to raise Rp 17 trillion (US$2.35 billion) for the state budget by March, has called for the extraordinary shareholders meeting at the request of the American investor group led by Newbridge Capital and Gilbert Global Equity Partners.

IBRA last month chose the American investor consortium as the preferred bidder for its 40 percent stake in Astra without a competitive bid, a move which irked the Astra management and flabbergasted securities analysts.

The transaction, if successfully closed, would earn around $500 million for IBRA.

The agency previously proposed that the forthcoming meeting annul the decisions adopted by the Astra shareholders meeting last March regarding the launch of a rights issue and sales of non-core assets to raise fresh funds for strengthening its capital and reducing its debt burden.

Astra adopted these two measures last year as part of its deal with foreign creditors to restructure about $1 billion in debts.

But IBRA chief Cacuk Sudarijanto proposed last week another (third) item for the agenda -- a replacement of the current Astra management -- also at the request of Newbridge/Gilbert, which alleged that the management obstructed a due diligence it intended to conduct as part of its deal with IBRA.

The management flatly rejected this allegation, arguing that as a publicly listed company, Astra acted only to comply with securities regulations.

However, this spat made negotiations between IBRA and the Astra management increasingly acrimonious, especially after the IBRA-Newbridge/Gilbert preliminary agreement on the transaction, supposed to be strictly confidential, somehow found its way to the print media.

IBRA received another blow after Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie said on Wednesday evening that Newbridge/Gilbert should pay the highest bid price for Astra shares.

Kwik's remarks contradicted the IBRA-Newbridge/Gilbert deal, whereby the investor consortium, as the preferred bidder, would only have to match, not to exceed, the price offered by other bidders to close the transaction.

He said IBRA should give other bidders a fair chance to buy Astra shares.

Kwik said that IBRA should honor its contract with Newbridge/Gilbert but he insisted that the transaction should be done in a transparent and fair manner.

The IBRA-Newbridge/Gilbert deal became a controversy as many analysts consider its terms too much in favor of the American investor group, including those regarding the share price, payment and breakup fee and other privileges.

Some analysts lambasted IBRA for its complete disregard of Astra's interests and disrespect of Astra management, which they said had performed well in reinvigorating the company to net a respectable profit last year, compared to a huge loss in 1998.

Several other analysts, however, contended that the leaking of the IBRA-Newbridge/Gilbert agreement damaged IBRA's credibility in making future deals with other investors.

Most analysts agree that the IBRA-Newbridge/Gilbert deal is a test case in the effort to woo back foreign investors to the crisis-hit country, but they wonder why the agency acted so unprofessional in dealing with investors.

IBRA's bid to sell its stake in Bank Bali to British-based Standard Chartered Bank last year was also in tatters due to a political scandal and failure to gain cooperation from the Bank Bali staff.

Analysts were perplexed by IBRA's apparent ignorance of the imperative to make its Astra deal transparent in compliance with securities market regulations.

Analysts have expressed great concern that a stymied deal for the Astra shares would damage IBRA's credibility and consequently affect its ability to raise Rp 16.2 trillion from asset sales between April and December for the 2000 state budget.

The questionable manners in which IBRA arranged the deal also unnecessarily brought Newbridge/Gilbert, a highly reputed international equity funds, into the controversy and to angry outbursts from the Astra management.

Some analysts said if IBRA could not garner enough votes to oust the incumbent Astra management at the forthcoming shareholders meeting, Newbridge/Gilbert might withdraw from the deal.