Tue, 05 Aug 2003

IBRA rejects Permata plan to issue bonds

The Jakarta Post, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) has rejected a plan by Bank Permata to issue bonds or rights shares aimed at bolstering its capital adequacy ratio (CAR).

IBRA said on Monday that the bank should first take other measures to improve its performance rather than depending on public funds from the issuance of bonds or rights shares.

"To date no approval for Permata to launch rights shares or bonds has been given. The bank was merged and received an injection of fresh capital (from the government); thus it must work out something else first," said IBRA deputy chairman I Nyoman Sender as quoted by Detik.com.

Sender said that Permata had several times requested IBRA's approval for the plan but it had been rejected each time.

He said that IBRA had not given any time frame for when the bank would be allowed to carry out its plan, but hinted out that IBRA would consider permitting the plan if there was no other way of improving the bank's performance.

Sender added that IBRA was also applying the same policy to other banks, such as Bank Lippo and Bank BII, which were all still under its majority control.

The banks were placed under IBRA's control after the agency bailed them out with government bonds in the wake of the 1997 economic crisis.

IBRA owns 99.6 percent of Permata after it was injected with more than Rp 10 trillion (US$1.1 billion) in recapitalization bonds last year.

In the first semester of this year, Permata booked a Rp 151.4 billion net profit, up from Rp 47.8 billion in the same period last year. This was the result of a doubling of interest income to Rp 1.7 trillion.

As of June this year, the bank's CAR was 10.5 percent, down from 12 percent as of September 2002 when the bank was established through a merger of five banks. Bank Indonesia requires all banks to have a minimum CAR of 8 percent or else they will face closure.

Permata emerged as the country's 10th-largest bank from the merger of five ailing banks controlled by IBRA, comprising Bank Bali, Bank Universal, Bank Arthamedia, Bank Prima Express and Bank Patriot.

The agency used public funds to finance the merger of the banks. It plans to sell Permata shares early next year.