T

he Insurance Deposit Agency (LPS) plans to commence the auction of Bank Mutiara '€” formerly Bank Century '€” in March or April at market price, more than five years after the lender'€™s controversial bailout in 2008.

The LPS, which holds 99.9 percent of shares in Mutiara, failed to attract buyers to acquire the bank for Rp 6.7 trillion (US$550.4 million) '€” the amount it spent on the bailout, which was 10 times higher than originally thought.

The LPS Law stipulates that any bank that has been rescued by the agency must be sold in the sixth year at its best price, regardless of the amount of funds spent on its bailout.

According to the LPS'€™ new executive chairman, Kartika '€œTiko'€ Wirjoatmodjo, the agency was engaged in '€œintense'€ preparations for the auction.

'€œWe have appointed [state-run investment company] Danareksa as our financial advisor, and a selling agent to assist us in attracting potential local investors. Meanwhile, we will appoint a foreign agent to attract investors overseas,'€ he told The Jakarta Post.

The LPS will also involve the state-run Development Finance Comptroller (BPKP) and the Deputy Attorney General for State Administrative Court Affairs (Jamdatun) as observers to ensure the whole process complies with the law.

'€œLooking at the political and legal aspects, we cannot deny that there are facts that may be misconstrued about the losses caused by the auction,'€ Tiko said.

The bailout resulted in lengthy investigations, which so far have entangled several high-profile figures and sent former Century owner Robert Tantular behind bars.

The bank stirred up a fresh controversy last year when the LPS spent Rp 1.25 trillion premium funds, which are paid for by banks to insure their customers'€™ money, to jack up Mutiara'€™s capital so that the bank could comply with a new BI regulation on minimum capital requirements.

The LPS claimed that the injection was not a second bailout.

Tiko dismissed accusations that the LPS had not fully done its job after failing to secure a buyer for the bank for five years since 2008.

'€œFrankly, there was never a serious bidder, whether Yawadwipa or the others,'€ he said.

Investment firm Yawadwipa Companies, along with other companies, such as Weston International Capital Ltd., previously expressed their respective interest in participating in the Mutiara sale, but no news was ever heard of their further involvement.

The LPS, according to Tiko, had not set an opening price for the upcoming auction, but would use Mutiara'€™s March 2014 financial report as a basis.

Mutiara'€™s January-September 2013 report showed that the lender had Rp 14.08 trillion in total assets, Rp 13.52 trillion in liabilities and Rp 569.13 billion in equities. The report also revealed that it suffered Rp 645.51 billion in net losses during the period.

Tiko claimed that several Asian banks had contacted both the LPS and Danareksa regarding the sale. He added that Mutiara'€™s current condition, especially after the latest capital injection, and a BI regulation on commercial bank ownership would hopefully be attractive enough to lure investors.

According to BI, investors wishing to purchase a bank rescued by the LPS may hold a majority stake '€” exceeding the current 40 percent threshold '€” for a period of 20 years.