Scandal's fallout hits Bank Bali rights issue

JAKARTA (JP): The high-profile scandal centering on a murky tangle of transactions has made it likely that Bank Bali will delay its rights issue plan until early next year.

The Capital Market Supervisory Agency (Bapepam) said that it could not guarantee its approval of Bank Bali's rights issue before Dec. 30, the date set by the bank to float the rights shares.

The head of Bapepam's Corporate Financial Analysis Bureau, Freddy R. Saragih, said his office was still unable to approve the plan because it had yet to receive all the necessary information.

He said Bapepam needed more explanations from Bank Bali's would-be investor Standard Chartered Bank (SCB) and the Indonesian Bank Restructuring Agency (IBRA) on their plans for the bank.

"If we are not satisfied with their explanation, we won't give the rights issue approval," he said.

Bapepam, he said, was awaiting copies of the agreements between IBRA and SCB. It had only the executive summary of the agreements as laid out in Bank Bali's rights issue prospectus.

Bapepam will examine the legal aspects of the agreements and determine if the agreements were against the interest of the investing public.

The investment agreement allows SCB to buy initially a 20 percent stake in Bank Bali from the government after the rights issue. SCB is also entitled to further increase its shareholding in Bank Bali by buying up the remaining shares from the government within five years.

The agreement also guarantees SCB's interest in privatizing Bank Bali through filing a request to delist Bank Bali from the Jakarta and Surabaya stock exchanges.

Freddy said Bapepam was responsible for protecting investors' interest and therefore was seeking as wide disclosure of information as possible for the public.

"We have yet to make an evaluation and clarification, particularly on the investment and management agreement," he said.

Freddy said Bapepam also needed another explanation from IBRA on the process of its takeover of Bank Bali.

Bank Bali's former majority owners Rudy Ramli and Herman Ramli have sued Bank Indonesia's Governor Sjahril Sabirin at the State Administrative Court for what they claimed to be 'questionable and improper procedures' under which the bank was taken over and put under IBRA.

The Ramli family demanded that Bank Bali's takeover be declared null and void and the bank be restored to its status before its July 23 take over.

The case is still pending at the State Administrative Court.

Early this month, a Jakarta district court decided to call off the trial of Rudy and three other former Bank Bali directors allegedly involved in the Bank Bali fund scandal on the grounds that the prosecutor's charges were vague and unacceptable.

The scandal revolves around the transfer of almost $80 million in early June from Bank Bali to a company controlled by a senior official of the Golkar party. The fund, paid as commission to get its interbank claims reimbursed by IBRA under the government guarantee scheme for bank deposits and claims, was alleged to be used to bankroll B.J. Habibie's presidential bid.

The fund was, however, returned to Bank Bali in August.

Rudy and several government officials are still under investigation on charges of corruption related to the fund scandal.

Bank Bali has planned to conduct a 99-for-1 rights issue on Dec. 30 with the exercise price of Rp 60.68 a piece on the Rp 5 nominal value to raise funds for its recapitalization.

The rights issue is expected to receive approval from Bapepam and the bank's shareholders before Dec. 30. The trading period of the rights shares is scheduled between Jan. 6 and Jan. 12.

As much as Rp 4.036 trillion would be raised through the rights issue.

Bank Bali's current rights issue plan has been based on the audited June 30 financial statement, which is valid only until the end of this year.

If the rights issue is delayed, the bank would have to use the September financial statement, but that would require at least another three months to complete the audit of the bank's financial statement.

Immamat Dalimunthe, an executive of securities company PT Vickers Ballas Tamara, said a delay in Bank Bali's rights issue would be good for public investors.

He said the rights issue should be conducted only after investigations into the Bank Bali scandal are completed.

If Bank Bali continues with its rights issue before the scandal is cleared, public investors will be hesitant to exercise their rights, he said.

The existing shareholders would lose up to 99 percent of their ownership after the rights issue if they do not exercise their rights.

Bapepam should stop its blinkered pursuit of reaching the targeted date if it wants to protect minority shareholders, Immamat said.

"They said this is for the sake of the country's bank restructuring program, but is there a guarantee of the success of the program itself?", he said.

Bank Bali's rights issue plan is part of the government- sponsored recapitalization program for private banks. Under the recapitalization program, the government will act as the standby buyer of the rights issue.

The government will pay for its stake in Bank Bali through the issuance of bonds worth up to Rp 4.036 trillion to raise the bank's Capital Adequacy Ratio (CAR) to the 4 percent required level.

CAR is the ratio between the bank's equity and the risk- weighted assets. The higher the ratio, the healthier the bank.

Bank Bali earlier reported net losses of Rp 1.43 trillion in the first nine months of the year, compared to Rp 39.71 billion in the same period last year. (udi/vin)