IBRA says Rudy Ramli himself picks UK's SCB

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) revealed on the weekend that it was former Bank Bali president Rudy Ramli's financial advisor J.P. Morgan who chose the UK-based Standard Chartered Bank (SCB) to become the bank's strategic investor.

IBRA corporate secretary Christovita Wiloto said in a media statement that in a letter dated April 21 to J.P Morgan Securities Asia Pte. Ltd in Singapore, Rudy referred to the opinion of J.P. Morgan representatives in Jakarta that the proposal offered by SCB was the most feasible compared to proposals offered by GE Capital and ABN AMRO.

"With a copy of this letter, it is expected that the public, particularly those related to Bank Bali, including its employees, can avoid disinformation, which would only lessen the value of Bank Bali," Christovita said.

IBRA provided The Jakarta Post with a copy of the letter, which was signed by Rudy and former Bank Bali deputy president Firman Soetjahja and addressed to J.P. Morgan Securities Pte. Ltd.'s managing director Stephen W. Berger and vice president David Khoo in Singapore.

However, the letter also expressed a great concern on the part of Bank Bali's Board of Directors and Board of Commissioners about the limited time available to Bank Bali to review the binding heads of agreement provided by SCB.

Rudy stated in his letter that Bank Bali's directors and commissioners were also concerned about the severely limited time available to review the agreements provided by IBRA in connection with the recapitalization program (Recapitalization Agreements).

"Therefore the Board of Directors and Board of Commissioners request J.P. Morgan in Singapore to provide Bank Bali with its specific commercial and financial advice on the terms and conditions of the heads of agreement (with SCB) and the Recapitalization Agreements and to coordinate the legal advice on such documents from Bank Bali's foreign legal advisers," Rudy's letter said.

IBRA has been under fire over its deal with SCB in connection with the British bank's plans to invest in Bank Bali.

Bank Bali staff have protested the plans, arguing that IBRA and the British bank were engaged in a conspiracy to acquire Bank Bali from the Ramli family through a hostile takeover.

"But the letter clearly says that the entry of SCB into Bank Bali was based on the advice made by Rudy Ramli's financial advisor J.P. Morgan" Christovita said.

Rudy quoted the opinion of J.P. Morgan representatives in Jakarta as saying that the proposal from SCB was "the only feasible offer from a strategic investor for Bank Bali to pursue under the current schedule for participation in the recapitalization imposed by IBRA."

The letter also pointed out that two other contenders, including GE Capital and ABN AMRO, were unlikely to match the offer of SCB.

GE Capital

However, GE Capital Asia Pacific president Daniel H. Mudd said in a letter to Farid Harjanto and Mardy Sutanto of IBRA on April 22 that his company was still greatly interested in continuing discussions on its memorandum of understanding with Bank Bali on March 5.

"We would like to meet with you to examine and discuss our proposal for the potential transaction, including possible modifications with a view to reaching mutually acceptable terms," Mudd said in his letter, a copy of which was sent to the Post.

Mudd said he realized the severe time restrictions faced in concluding a deal but suggested that" it would be beneficial to all parties to thoroughly examine and discuss the potential transaction notwithstanding the deadline and seek your support in allowing this to occur."

"Based on extensive discussions with the Bank (Bali) and its advisor JP Morgan, they chose us as the only potential investor to sign a memorandum of understanding with the Bank on March 5, 1999," Mudd added in his letter.

He recalled GE Capital's letter of interest to Bank Bali on Nov. 5, 1998 and the many discussions with Bank Bali to review its financial information.

"We completed a preliminary due diligence in December, 1998," Mudd said.

In this regard, Mudd added, GE Capital remained ready to discuss the transaction with the government forthwith and devote resources to examining and finalizing the transaction, including conducting a full due diligence.

Bank Bali was taken over by IBRA late in July after its owner failed to provide cash by the extended deadline to finance 20 percent of the bank's recapitalization cost.

Under the country's bank recapitalization program, the government would provide up to 80 percent financing.

IBRA then signed a contract with SCB in the same month, allowing the latter to temporarily lead the management of Bank Bali for three years.

SCB also promised to buy a 20 percent stake in the bank to help finance the recapitalization program. The British bank had opened a US$56 million escrow account in Chase Manhattan Bank.

Publicly listed Bank Bali was to launch a rights issue in next month to facilitate the recapitalization program. IBRA was to become a standby purchaser of the rights shares not exercised by the existing shareholders. SCB would then buy the Bank Bali shares from IBRA.

But the Bank Bali staff staged a massive protest against the SCB-lead management team for weeks, prompting IBRA to replace the temporary team and revise its management contract agreement with SCB.

But IBRA still maintains the investment agreement with SCB, the first major foreign investor to participate in financing the country's costly bank restructuring program.

Analysts said that if the SCB deal failed, it could cause a serious threat to the country's overall bank restructuring program as this would discourage other foreign investors to participate.

IBRA is planning to sell a 30 percent stake in Bank Central Asia (BCA) to the public in the near future to raise some Rp 3 trillion for the government coffers.

BCA, previously the country's largest private bank, has also been taken over by IBRA.

If the BCA flotation is successful it may also create a positive domino effect on the overall economy. (rei)