IBRA reappoints financial advisors ahead of planned BCA sale

Berni K Moestafa, The Jakarta Post, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) has reappointed PT Danareksa Sekuritas and PT Merrill Lynch Pte Ltd. as its financial advisors for the sale of Bank Central Asia (BCA).

Danareksa and Merrill Lynch had been IBRA's advisors for the unsuccessful sale of a 30 percent stake in BCA last July.

In its press statement, IBRA fell short of explaining the reasons for their reappointment. IBRA officials could not be reached for comment.

The sale of BCA is part of economic reforms targets the government must meet in order to keep receiving International Monetary Fund (IMF) loans.

The IMF has pledged a US$5 billion aid package under a three- year reform program, providing Indonesia stands firm on its reforms.

Last year IBRA failed to sell a 40 percent stake in BCA after legislators blocked the move, reasoning market conditions were unfavorable at the time.

The IMF reacted to the delayed sale, and the failure to meet several other reform targets, by freezing its lending program to Indonesia. It resumed the program last August, after an eight- month suspension.

This year, the government secured the approval of legislators for BCA's sale but only after promising to split the process into two phases.

To ensure the best possible price, legislators demanded that IBRA divide up the 40 percent sell off into a secondary public offering and private placement.

IBRA then sold a 10 percent stake through a secondary offering in early July. But it floundered in its efforts to sell the other 30 percent.

Many believe the second attempt turned sour due to the low bids received.

IBRA chairman I Putu Gede Ary Suta had earlier admitted that the latest attempt to sell the 30 percent stake attracted only two bidders.

He said the government should have offered a controlling stake of at least 51 percent to make the sales pitch more attractive.

Under the August lending agreement with the IMF, the government promised to sell off a 51 percent stake in the bank by the end of this year.

IBRA once again sought the approval of the legislators for upping the offered stake in BCA, which was forthcoming.

But again they demanded a two tier sales strategy for the same reason, that is realizing the best possible price.

Based on that, IBRA then split the sale for the 51 percent stake in two, with 21 percent to be sold later under an option.

The agency did not say when it expected to finalize the sale.

IBRA officials declined to reiterate their commitment to sell the entire 51 percent this year as promised to the IMF.

Nonetheless, IMF senior representative in Jakarta David C.L. Nellor expressed no concerns over the latest development.