IBRA increases Bank Niaga stake for sale to 71%

IBRA increases Bank Niaga stake for sale to 71%

Dadan Wijaksana, The Jakarta Post, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) said on Tuesday
it would sell up to 71 percent shares in publicly listed Bank
Niaga, of which the first 20 percent stake would be sold via the
stock market.

IBRA chairman Syafruddin Temenggung, however, said that the
sale mechanism for the initial 51 percent stake had not been
decided.

"The sale of the Bank Niaga stake should be completed by mid-
September," he told reporters.

The government via IBRA had initially planned to sell a 51
percent stake in the mid-sized bank to strategic investors. But
the strategic sale was canceled on Sunday because the only two
bidders, consortia led by Australia's ANZ Banking Group and
Commerce-Assets Holding Bhd., had offered low bidding prices.

The Financial Sector Policy Committee (FSPC), which groups
several senior economics ministers and has the final say on the
government's major asset sale program, then ordered IBRA to seek
other divestment mechanisms to obtain greater proceeds.

IBRA controls more than a 97 percent stake in Bank Niaga after
the government bailed out and recapitalized the bank in the late
1990s.

The sale of the Bank Niaga stake is expected to generate
proceeds to help finance the state budget deficit, which this
year is estimated at 2.5 percent of gross domestic product (GDP).
IBRA is targeted to raise more than Rp 35 trillion (about US$4
billion) in cash in 2002.

An FSPC official said earlier that the two aforementioned
strategic investors only offered a price of Rp 20 to Rp 30 per
share for the 51 percent Bank Niaga stake, much lower than the
price of the Bank Niaga shares of around Rp 70 on the stock
market when the final bids were entered.

IBRA has insisted that the bids should be around the market
price level.

But analysts have said that the market price could not be used
as a benchmark because less than 3 percent of Bank Niaga shares
are listed on the stock exchange.

They added that the bank's price-to-book value was around Rp
15 per share, rendering the price offered by strategic investors
as reasonable.

The new IBRA strategy, selling the first 20 percent stake via
the stock market, should provide a benchmark for the sale of the
remaining 51 percent stake.

Elsewhere, Syafruddin said that the agency would still have to
discuss the new divestment strategy with related institutions,
including the House of Representatives and the Capital Market
Supervisory Agency (Bapepam).

The House has only approved the 51 percent sale of the Bank
Niaga stake.

The Bank Niaga divestment program was supposed to be completed
this month, as promised by the government to the International
Monetary Fund, which is providing the country with a multibillion
dollar bailout.

The fund has insisted that the government should not delay the
sale program so it could carry on with other banks sales.

Following the completion of the Niaga sale, the divestment
process will continue, with Bank Lippo and Bank Danamon being
next on the list. All sales should be completed before the end of
the year.

So meeting the deadline will be decisive as delays in the
assets sales program, such as the Niaga sale, would not only
hamper IBRA's efforts to raise a huge amount of cash this year,
but would also hurt the rising confidence of foreign investors in
the country's economic reform program.

The IMF has stated that the country's divestment of Bank
Central Asia, the first ever, has managed to lure capital inflow
from investors.