T

he Indonesia Deposit Insurance Corporation (LPS), which took over an ailing Bank Century — now Bank Mutiara — in a much-debated Rp 6.7 trillion (US$716 million) bailout in 2008, will offer the lender in October after a recently failed offering.

LPS took over the bank that was since re-branded and has evolved into Bank Mutiara in a bailout that was disapproved of by the House of Representatives, with a three-to five-year transition process in which it was required to sell the bank.

Earlier this year, LPS appointed Danareksa Sekuritas to arrange the sale of its 100 percent stake in Bank Mutiara, kicking off the shares offering in August.

However, LPS executive director Firdaus Djaelani said the offering period was “too short” due to strict requirements for acquiring banks that necessitate ample planning time for potential investors.

“We will re-invite [investors] in October and give more time so that there will be no administrative issues,” he told reporters in Jakarta over the weekend. “Previously, [the offering period] was one month. In the next offering, we will probably extend it to three months.”

Three investors expressed interest in acquiring Bank Mutiara in the August offering period, namely two securities company and one consulting firm that represented undisclosed clients, Firdaus said. “They’re mostly foreign [firms], but there’s also one joint venture.”

The LPS expected to attract new investors in the next bidding period by planning a road show overseas to lure more investors, he added.

Under the existing Law on State Bailouts, the LPS should sell Bank Mutiara for at least the price it paid for it, which was Rp 6.7 trillion. As of the end of 2010, Bank Mutiara had assets of Rp 10.78 trillion, according to the bank’s financial statement.

A central bank official who assesses licenses for banking operations said recently that he was “instructed” by Bank Indonesia’s (BI) board of governors not to accept acquisitions of local banks until a new regulation on single ownership of bank shares was issued.

Firdaus said he had discussed that issue with BI, adding that the central bank had pledged to “help” ease Bank Mutiara’s sale process, as it was a “special case”.

Aviliani, a banking observer and economist at the Institute for Development of Economy and Finance (INDEF), told The Jakarta Post on Sunday that it would be “difficult” for Bank Mutiara to be sold for Rp 6.7 trillion due to its “reputation risks”.

“If [Bank Mutiara] is sold for less than Rp 6.7 trillion, there will be renewed debate at the House. Investors will also be reluctant if the price is too high,” she said over the phone. “People are still debating the Bank Century case. It’s not over yet. Once debates emerge, customers will withdraw their funds.” Therefore, Aviliani suggested that one of state-owned lenders take over Bank Mutiara so the bank could re-gain trust from customers. “Payment could be done through dividends.”