Scandal's fallout hits Bank Bali rights issue

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)