IBRA tightens up criteria for BCA bidders: Mar'ie

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) said on Wednesday that the tender for its stake in Bank Central Asia was still open to new bidders, but that the criteria for investors were being tightened.

Chairman of the independent Oversight Committee of IBRA, Mar'ie Muhammad, said the committee and IBRA had agreed on tougher requirements for bidders to ascertain the most suitable partner for the bank.

Mar'ie said that one of the criteria was specially designed to ensure that BCA's strategic partner was capable of increasing the bank's value.

"The institution to invest in BCA must have a thorough knowledge of the banking industry," he added.

He said that the investor should be committed to the long-term future of the bank, and keep its stake for a period of at least five years. "Don't buy to sell," he said.

Furthermore, he went on, BCA's future strategic partner must have a good track record and should also submit to a fit and proper test by Bank Indonesia.

"But even if the investor is of good quality, has a good track record and has passed BI (Bank Indonesia)'s fit and proper test, it must also be able to disclose the source of its funds," Mar'ie pointed out.

He said that bidders must certify that the money they used to invest in BCA was free of any "hanky pangky."

"If it (the bidder) does not dare to disclose its funding source, it will be struck off the list," Mar'ie remarked.

He said the tougher terms would restrict bidders to those who would bring high added value and synergies to BCA.

The oversight committee is an independent body supervising IBRA's policies. Its authority, however, is limited to non- binding recommendations.

Mar'ie told reporters after a closed-doors meeting with IBRA executives that the new criteria would also help ensure transparency in the tender process for the 30 percent stake in the publicly listed BCA.

The government must divest a 40 percent stake in the bank this year, as part of its agreement with the International Monetary Funds (IMF).

As agreed with legislators, the government early this month sold a 10 percent stake through a secondary public offering, and will sell the other 30 percent through private placement.

"And if it (the institution) has met all these criteria, there is still one more additional requirement: the bid must be competitive," he continued.

He said a strategic partner should not be allowed to force its way into BCA simply because it offered the best qualities.

The imposition of the tough conditions has come on the heels of the controversies that have shrouded the tender process which started in May.

Critics have attacked IBRA for the lack of transparency throughout the sale process and its foot-dragging in reaching a deal.

BCA was due for divestment late last year. But legislators blocked the sale on fears that sluggish market conditions would drive the bank's price down.

The move was one of the reasons the IMF delayed the disbursement of a $400 million loan tranche.

Last month IBRA said it was close to a deal, yet later backtracked saying it needed more time to haggle for a higher price.

The agency said it wanted bidders to pay a premium on the price of BCA shares on the stock market.

Though IBRA has given no deadline on the sales, government documents have cited the end of September as a target date.

Earlier this month, IBRA completed a secondary public offering of a 10 percent stake in BCA that, according to the agency, was oversubscribed.

But IBRA remains tightlipped over the status of the BCA tender offering, saying that negotiations are still underway.

Mar'ie said IBRA was open to new bids as the tender process had not been finalized yet.

Responding to questions about the re-tendering of the BCA sale, Mar'ie said: "I've already checked that there is no winner yet. It's still an ongoing process."

Earlier, IBRA chairman I Putu Gede Ary Suta said some 55 to 60 bidders had participated when the divestment process began in May.

But he conceded he had not yet seen the names of the bidders.

It remains unclear how many bidders have survived, and at what stage IBRA is in the tender process.

Unconfirmed reports say that only two bidders have made it thus far: one foreign, the other a joint venture.

They are the investment firms Newbridge Capital and Indonesia Recovery Company Limited (IRCL).

The U.S.-based Newbridge made a failed attempt last year to acquire a stake in PT Astra International that was also put for sale by IBRA.

Meanwhile, IRCL is a joint venture between local firm Bhakti Capital Investama and Hong Kong's Asia Debt Management.

Given their nature as investment firms, Mar'ie's criteria may jeopardize Newbridge and IRCL's chances of winning a stake in BCA. (bkm)