IBRA rejects Permata plan to issue bonds

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.