INDONESIA FINANCIAL SECTOR MONTHLY REPORT NO. 42 February 2004

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1 INDONESIA FINANCIAL SECTOR MONTHLY REPORT NO. 42 February 2004 RECENT DEVELOPMENTS: IBRA divested shares in 4 (four) banks. On 20 th February 2004 IBRA announced that it had sold its shares in Bank Central Asia (BCA), Danamon, Bank Internasional Indonesia (BII) and Bank Niaga through market placement (Table 1). IBRA received Rp1.55 trillion from this transaction. After completion of several divestment programs, IBRA had reduced its majority ownership in banks except in Bank Permata where it still holds 91.4% of total shares. IBRA closed its deal on the divestment of Bank Lippo. Following IBRA s January 2004 announcement on Swissasia Global consortium as the preferred bidder in the divestment of 52.05% shares of Bank Lippo, in the third week of February 2004 Bank Indonesia announced that the consortium passed the fit and proper test. Therefore, IBRA continued the process to close the transaction and received the proceeds amounting to Rp1.2 trillion. On 25 February 2004, Bank Lippo had an extraordinary shareholders meeting and appointed new members of Board of s and Board of s (Table 2). IBRA announced default of Texmaco Group and annulled its debt restructuring. At the end of February 2004, IBRA declared Texmaco Group in default on its Rp29 trillion debts to IBRA. IBRA restructured Texmaco s debts in October 2001 by converting bank loans to exchangeable bonds. The group failed to honor the payment on its coupon on the bonds amounting to Rp139 billion due in August Consequently IBRA required the incumbent shareholders (Marimutu Sinivasan) to pay the total debt immediately. Previously, IBRA had tried to sell the bonds several times through its strategic assets sale program but failed due to low bid price. The government closed IBRA and created state-owned AMC. The government officially closed IBRA on the 27 February 2004 with the issuance of a Presidential Decision (Kepres) No. 15/2004. However around 150 of IBRA s staff headed by IBRA s last chairman will continue to work until end of April The government transferred ownership of IBRA s remaining assets to the Ministry of Finance but the management of these assets will be assumed by a new asset management company called PPA which was created under a Government Decision (PP) No. 10/2004 (Table 3). Subsequently, the government appointed a management team for PPA which mainly consist of former IBRA officials (Table 4). At the closing date, IBRA still had remaining assets with a book value of Rp274.2 trillion. Of this amount, Rp108.5 trillion are free and clear and thus ready to be transferred to PPA. Still prior to this transfer, the Supreme Audit Board (BPK) will need to verify values of these assets. The remaining assets with book value Rp165.7 trillion are not yet free and clear. To handle these assets, the government through Kepres No.16/2004 establihsed a settlement team headed by the Minister of Monthly Report February 2004 Page 1 of 5

2 Finance. This team has 6 (six) months to work on these assets for eventual transfer to the PPA. To replace IBRA as the administrator of the deposits guarantee program, the government appointed Ministry of Finance to take over the responsibility as outlined in Kepres No27/2004. The operation of this program is conducted by a transition team called UP3 since 1 March IBRA transferred Rp5 trillion and recorded an overall recovery rate of 28%. IBRA said it had transferred Rp5 trillion to the government and thus met the collection target for this year. In total since 1998, IBRA claimed to have collected and transferred Rp168 trillion to the government which represents a recovery rate of 28%. On the remaining assets of Rp274 trillion book value, IBRA indicated a recovery rate of only 10% or around Rp15 trillion. These assets will be transferred to the PPA at this estimated recovery value (Table 5). Updates on PKPS (Shareholders Settlement Agreements) Obligors. PKPS consists of 3 types of agreements: MSAA, MRNIA and APU. There are 5 obligors under MSAA, 4 obligors under MRNIA and 30 obligors under APU. With regards to MSAA obligors, 2 obligors (Ibrahim Risjad and Sudwikatmono) have settled their debts and been given the certificate of full payment (SKL). Another 2 obligors (Soedono Salim and Sjamsul) are expected to settle in the near term. The settlement of the remaining MSAA obligor (Muhammad Hasan) is still in process but is expected to be completed before end April On MRNIA obligors, IBRA had sold the debts (Promissory Notes) of 2 MRNIA obligors (Usman Atmadjaya and Hokkiarto ) through asset sale programs. The settlement of the remaining 2 MRNIA obligors (Samadikun Hartono and Kaharudin Ongko) are still in process. It is likely that these cases will not be settled by end of April Regarding APU obligors, 8 obligors have been considered uncooperative upon which the government will take legal actions. IBRA said 16 obligors have settled their debts or are expected to settle soon subject to FSPC s approval or results of valuation of assets they surrendered. The settlement of the remaining 6 APU obligors are still in progress. At this time, it is not certain if these APU obligors would be able to settle their debts by end April The Government issued Rupiah Bonds and is to issue US$ Bonds. On 16 March 2004, the government held an auction of Government Bonds. The bonds have a series number of FR0023 with a nominal value of Rp2 trillion and will mature in 8 (eight) years. The coupon rate is fixed at 11% per year which is payable twice a year on 15 June and 15 December. Earlier in 24 February 2004 the government also issued series FR00023 bonds with nominal value of Rp2.52 trillion (Table 6). Furthermore, on 3 March 2004 the government said it had finalized the terms for the issuance of a global USD denominated bond issuance with a nominal amount of US$1 billion that matures in 10 (ten years). The bond pays a fixed coupon of 6.75% per year with yield at 6.85% or 277 basis point higher than that of US Treasury bonds. The settlement process was conducted on 10 March 2004 and the bonds is listed on Luxembourg Stock Exchange. Monthly Report February 2004 Page 2 of 5

3 The government proposed 3 (three) candidates for BI s Senior Deputy Governor position. The President is reported to have submitted to the parliament 3 (three) candidates for the position of senior deputy governor at Bank Indonesia. These candidates are Miranda Goeltom (former deputy governor), Hartadi A. Sarwono (currently deputy governor) and Budi Rahardjo (currently head of BI office in Tokyo). The current senior deputy governor, Anwar Nasution will end his term in June The Government sold another 10% of Bank Mandiri s shares. After selling 20% of Bank Mandiri s ownership through an IPO in June 2003, the government recently sold another 10% of Bank Mandiri s shares through a private placement. Bank Mandiri s shares are listed on the Jakarta Stock Exchange. The government sold the shares at Rp1,450 per share, which roughly equal to the average market price, and received US$336 million (Rp2.9 trillion) from the transaction. The government also plans to sell around 30% of Bank BNI s shares in the second semester of this year through secondary public offering. Bank BNI is the second largest bank in the country and its shares are listed on the Jakarta Stock Exchange since November Table 1: IBRA Divestment of Banks Shares Items Danamon Niaga BII BCA No of shares offered 385,193,377 3,616,771, ,932,537 88,253,438 Oversubscribed ratio (x) Shares allocation: foreign : local investors 60:40 99:1 72:25 65:35 Price (Rp) Proceeds (Rp billion) 1, Remaining IBRA ownership in the bank (%) Source: IBRA Table 2: Bank Lippo s new Board Members Board of s Joseph Luhukay President Yusuf Valent Lee Heok Seng Mark Mc Kenny Hugeng Gozali Tjindrasa Ng Harry Sasongko Board of s Mochtar Riyadi Reiner Silhavy Roy edu Tirtadji Jan G. Cherim President Vice President Monthly Report February 2004 Page 3 of 5

4 I. Nyoman Tjager James C. Ng Djisman Simanjuntak Christopher Williams Source: Bank Lippo Table 3: Regulations related to IBRA closure Presidential Decision PP No. 10/2004 Kepres No. 15/2004 Subject Establishment of state owned AMC Closing and liquidation of IBRA Kepres No. 16/2004 Establishment of IBRA's settlement team Kepres No. 17/2004 Continution of deposit guarantee program and transfer responsibility from IBRA to Ministry of Finance Source: Ministry of Finance Table 4: Board of s and s of PPA Board of s Mohammad Syahrial Raden Pardede Wandy Wira Riady Emma Sri Martini Ananda Barata Rachmat Saptaman Krisna Daswara President Deputy President Board of s Bacelius Ruru Lambock V. Nahattands Haidah Herawati MA Erwin Mapaseng Machfud Sidik President Vice President Lutfi I. Nasoetion Taufik M. Maroef Source: Ministry of Finance, Investor Indonesia Table 5: IBRA s Remaining Assets To be transferred to PPA No of assets Book Value Transferred Value Bank Restructuring Unit 6 4,859 4,859 Asset Management Credit ,800 2,001 Asset Management Investment ,840 3,958 Monthly Report February 2004 Page 4 of 5

5 Total 2, ,499 10,818 Still with Settlement Team No of assets Book Value Transferred Value Bank Restructuring Unit Asset Management Credit ,781 2,417 Asset Management Investment 50 95,987 1,930 Total 4, ,768 4,346 Source: IBRA, Kompas, Tempo, Bisnis Indonesia and kontan Table 6: Results of Government Bonds Auctions Auction Date 26-Feb Mar-04 Series No FR00023 FR00023 Nominal Rp 2.52 trillion Rp 2 trillion Lowest yield 11.65% 11.40% Highest yield 12.00% 11.60% Average yield 11.82% 11.57% Coupon 11.00% 11.00% Issuance date 26-Feb Mar-04 Maturity date 15-Oct Dec-12 Coupon date 15 June & 15 Dec 15 June & 15 Dec Bid to cover ratio Source: Ministry of Finance <<<>>> Monthly Report February 2004 Page 5 of 5