IBRA hits another snag in Astra deal

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.