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Mandiri to raise up to Rp 7t from rights issue
State-run Bank Mandiri, Indonesia’s largest bank by assets, plans to sell news shares amounting to 11 percent of its stakes in a rights offer in the second half this year in order to strengthen the company’s capital structure, president director Agus Martowardojo said Tuesday
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tate-run Bank Mandiri, Indonesia’s largest bank by assets, plans to sell news shares amounting to 11 percent of its stakes in a rights offer in the second half this year in order to strengthen the company’s capital structure, president director Agus Martowardojo said Tuesday.
The 11 percent shares are worth between Rp 6 trillion (US$666 million) and Rp 7 trillion, he said on the sidelines of the Maluku-North Maluku Investment Day held by the bank.
If the government does not use its rights to buy the shares, its ownership will decline to 60
percent.
“Concerning the rights issue, we will have capital [adequacy ratio] in the 2011-2014 period of
between 12 percent and 15 percent, despite credit growth on average to reach 20-21 percent,” he said.
“Without the rights issue the capital [ratio)] can drop below 12 percent.”
A rights issue means a publicly listed company can sell new shares to raise fresh capital.
The existing shareholders have the privilege to buy the shares.
Refusing to buy the shares will dilute their share ownership.
As of February, Mandiri had Rp 363.74 trillion in assets, or 14.45 percent of total banking assets of Rp 1,625.42 trillion, according to the central bank.
Agus said the rights issue plan is under discussion at the Coordinating Economic Industry. “It’s still being discussed by the Privatization Committee at the Coordinating Economic Industry.
“The State-Owned Enterprises Ministry has made a recommendation. It will be discussed with the House of Representatives,” he said.
If the plan fails to materialize, Agus said Mandiri would issue a subordinated debt worth Rp 3 trillion in the second half of this year or early 2011.
A subdebt means a security that ranks below other securities with regard to claims on assets or earnings. It is riskier because in the case of default, creditors with subdebt will not be paid out until after the senior debt holders are paid in full.
State-Owned Enterprises Minister Mustafa Abubakar said JPMorgan Chase & Co., the second-biggest US bank by assets, had expressed interest in raising investment in Indonesia, including in the banking sector.
“They are very interested to raise investment banking, and ordinary investment through credit cooperation in the banking sector,” he said, adding that these aspects in discussion.
Investors have provided more capital in Indonesia after the country managed to book a strong 4.5 percent growth last year amid the global financial crisis.
Agus said Mandiri was open if JPMorgan wanted to buy its shares through the planned rights issue. “We open ourselves ... As long as it remains a state firm and provides added value for the Indonesian people,” he said.
As of February, Mandiri had Rp 363.74 trillion in assets, or 14.45 percent of Indonesia’s total banking assets.
