Mandiri sets pricing scheme for BII takeover

JAKARTA (JP): State-owned Bank Mandiri said on Thursday that the acquisition price of Bank Internasional Indonesia (BII) depended on how much capital BII needed to meet the minimum capital adequacy ratio (CAR) requirement of 8 percent.

Bank Mandiri president E.C.W Neloe said his bank would buy BII at an amount that would bring BII's CAR to 8 percent.

"We haven't started discussions on the price ... first we will try to find out what it will take to achieve a CAR of 8 percent," he said.

CAR measures a bank's capital against its risk-weighted assets, which include loans.

BII's total capital, he said, would reflect the bank's book value, on which Bank Mandiri would negotiate a price.

"If for instance, BII needs (total) capital of Rp 1 trillion (about US$103.25 million), and the amount is 1.3 times its book value, we should pay Rp 1.3 trillion for the bank," he explained.

Bank Mandiri is preparing to acquire BII, which runs the risk of falling short in meeting the 8 percent CAR level.

Bank Indonesia threatens to liquidate banks unable to meet the minimum level by the end of this year.

Almost half of BII's loans were channeled to the heavily indebted Sinar Mas Group. The Group is close to defaulting its debts after its subsidiary, Asia Pulp & Paper (APP), declared a payment standstill on debts totaling $13 billion.

Under the BII acquisition plan, the government will take over Sinar Mas loans and replace them with government bonds.

BII is 56.78 percent owned by the government, 17.86 percent by the Sinar Mas Group and 25.36 percent by the public.

Neloe said he planned to complete BII's acquisition by late October, with Bank Mandiri recently having concluded a due diligence audit of the bank.

Right now, he said, Bank Mandiri was comparing the due diligence results with data collated by the government and BII.

He also insisted on funding the purchase using recapitalization bonds instead of funds from Bank Mandiri's own operations.(bkm)