Rp 6.6t for merger, BII's rights issue: IBRA
The Jakarta Post, Jakarta
The Indonesian Bank Restructuring Agency (IBRA) has set aside Rp 6.6 trillion (some US$660 million) worth of bonds to finance the planned merger of five banks and a Bank Internasional Indonesia (BII) rights issue.
The agency's chairman I Putu Ary Suta said on Wednesday the bonds in question were part of the Rp 20.5 trillion recapitalization bonds collected from three banks as part of the agency's assets-to-bonds swap throughout 2001.
"Those are the remaining bonds that we took over from Bank Mandiri, Bank Danamon and Bank Internasional Indonesia (BII) in 2001," he said.
He did not elaborate on the value of bonds to be allocated to the five banks and BII, saying the agency was still calculating.
Ary Suta was speaking to reporters on the sidelines of a hearing with the House budget commission.
IBRA plans to merge five banks under its supervision, namely Bank Prima Express, Bank Patriot, Bank Bali, Bank Universal and Bank Artha Media.
The five banks are among the 11 private banks under the control of IBRA, which is responsible for leading the banks back into good financial shape before returning them to the private sector.
The merging of local banks is seen as part of the effort to restructure the country's faltering banking sector, widely blamed for the country's lingering economic crisis.
The government injected liquidity support to local banks after most of their loans turned sour at the peak of the 1997 financial crisis. In return, the government, via IBRA, took them over.
As for the bonds for BII, the agency said it would use them to buy the bank's shares in case its rights issue failed to attract buyers.
"The recycle bonds will be used by the government as a standby buyer (to buy BII's shares) when the rights issue plan is realized," said the agency's deputy chairman Soebowo Musa, who was also present the hearing.
A rights issue means selling part of the bank's shares to raise cash to help strengthen its capital, thus improving the bank's capital adequacy ratio (CAR).
CAR measures a bank's capital against its risk-weighted assets, including loans.