Investment banks to oversee BCA IPO

Investment banks to oversee BCA IPO

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA)
announced on Monday that it had appointed investment banks Lehman
Brothers and Merrill Lynch and local securities firms PT
Danareksa Sekuritas and PT Bahana Securities to prepare the
initial public offering (IPO) for Bank Central Asia (BCA).

"The IPO will be made either at the end of this year or early
next year, depending on the market condition," IBRA announced in
a press statement.

The agency said it was determined to maximize the IPO proceeds
to help finance the government bank restructuring program.

BCA, the country's largest private bank, was nationalized in
August 1998, after the bank breached the legal lending limit and
its owners, the Salim Group and former president Soeharto's
children, failed to repay massive emergency liquidity support
from the central bank.

BCA had total assets of Rp 84.4 trillion (US$10.8 billion) and
Rp 1.6 trillion in equity. As of June, BCA had some 767 branches
throughout the country and 21,859 employees.

The government recapitalized the bank in May.

"IBRA is determined to develop and promote the Indonesian
capital market. We're confident that the offering will restore
confidence in the recovery of the Indonesian economy," said IBRA
chairman Glenn S. Yusuf.

IBRA has a mission to help finance the government bank
restructuring program, which is expected to cost some Rp 550
trillion, or roughly half of the country's gross domestic
product.

The government will issue bonds to finance the program. The
government is expected to issue more than Rp 300 trillion worth
of bonds this year mainly to finance the recapitalization cost of
several major banks.

The total interest cost of the bonds in the current fiscal
year ending in March 2000 is estimated at Rp 34 trillion, half of
which would be covered by the sale of IBRA assets, including BCA.

IBRA currently controls some Rp 600 trillion worth of assets
and non-performing loans.

Many, however, have expressed doubts over whether IBRA can
raise the targeted Rp 17 trillion of proceeds amid the country's
political upheavals and the Bank Bali scandal which implicated
two of the agency's deputy chairmen: Farid Harianto and Pande
Lubis.

IBRA deputy chairman Arwin Rasyid acknowledged last week that
if the political unrest dragged on till January, the agency would
be unable to achieve the target.

Farid said that considering BCA's substantial size, the bank's
IPO would be an acid test for the future of IBRA's asset disposal
program.

"We hope this IPO will be successful," he said.

Sentiment toward Indonesia's stock market has been bearish
amid the current political uncertainty, although some said that
if the Oct. 20 presidential election unfolded smoothly, a bullish
Jakarta Stock Exchange would follow.

Minister of Finance Bambang Subianto expressed satisfaction
over IBRA's handling of the BCA public offer.

"The ability of IBRA in preparing BCA's public offering is
very impressive. The government very much appreciates the
progress which has been achieved and expects this success to also
be extended to other bank recapitalization programs," Bambang
said, in an apparent move to dismiss questions over IBRA
professionalism.

IBRA has been under strong criticism over the Bank Bali
scandal.

The House of Representatives special investigative team
recently concluded that President B.J. Habibie should suspend
several ministers and high-ranking government officials,
including Bambang and Jusuf, over their indirect involvement in
the scandal. (rei)