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WHOLESALE BANKING | Cesar Tordesillas, Indonesia

Indonesian banks to boost capital via rights issue

To raise funds for business expansion.

This is the objective of Bank Permata and Bank Artha Graha in issuing rights shares.

The two lenders will issue their rights shares in order to increase their ahead of Bank Indonesia’s plan to fully implement the global regulatory standard on banks Basel II and Basel III, according to analyst of PT Investa Saran Mandiri Kiswoyo Adi Joe.

Permata would sell 1.64 billion new shares, or 15.38 percent of its enlarged capital, priced at Rp 1,215 apiece in a preemptive rights issue. Permata expects to pocket Rp 1.99 trillion US$207 million from the preemptive rights issue. Existing shareholders are allowed to buy two new shares for every 11 old shares they hold.

 “Proceeds from the rights issue will be treated as tier capital according to regulations from Bank Indonesia and will be used in credit disbursement as part of the company’s expansion,” Permata said.

Permata will seek approval for the preemptive rights issue plan in a meeting with shareholders scheduled for Nov. 22. The bank expects to carry out the preemptive rights issue this December.

Meanwhile, Artha Graha will would issue 4.51 billion new shares priced at Rp 111 apiece. Artha Graha will generate Rp 500 billion from the rights issue. Shareholders are entitled to buy 10 new shares for every 19 old shares they hold.

The company will also offer warrants of 2.71 billion pieces as sweeteners. Shareholders exercising their rights will be entitled to receive six warrants for every 10 new shares they buy.

“All funds will be used as working capital, which will be channeled into productive assets, especially lending,” Artha Graha said in a written statement.

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