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PT Bank Danamon Indonesia, backed by Temasek Holdings Pte and Deutsche Bank AG, plans to raise about 4 trillion rupiah ($336 million) from existing shareholders to replenish capital, two people familiar with the matter said.
The fifth-biggest Indonesian bank may announce details on the rights offer this week, the two people said, asking not to be identified because they aren’t permitted to discuss the matter publicly. Danamon may sell the shares at a discount of at least 45 percent to the last closing price before the announcement, they said.
Danamon joins banks in Australia, South Korea, Japan and China in selling shares or bonds to shore up finances as economies across the Asia-Pacific region falter. The proceeds may help Danamon, which plans to repurchase $300 million of its subordinated debt next month, to boost lending by 10 percent this year and maintain its capital adequacy ratio.
“Investors’ reaction at first will definitely be negative” because their stake may be diluted, said Lanang Trihardian, an analyst at PT Syailendra Capital in Jakarta. Still, if Danamon “uses it to increase capital, and given that the price has dropped significantly, they might attract investors.”
Shares of Jakarta-based Danamon have declined 27 percent this year, making it the third-worst performer in the 68-member Jakarta Finance Index. The shares fell 1.1 percent to 2,275 rupiah at 1:33 p.m. Jakarta time.
Temasek may subscribe
Temasek, which controls about 58 percent of Danamon, may subscribe to the sale, the people said. Danamon said last week it plans to seek shareholders’ approval for a rights offer on March 20, without giving details.
Danamon’s profit fell 29 percent to 1.5 trillion rupiah last year after it set aside money to cover losses from derivatives transactions, the bank said Jan. 21. The company’s shares have slumped 69 percent in the past year, trimming Danamon’s market value to 11.5 trillion rupiah.
Vera Eve Lim, Danamon’s chief financial officer, and Joseph Luhukai, a vice president director at the bank, didn’t immediately respond to mobile-phone text messages and e-mails, and didn’t answer calls made to their mobile phones. Temasek, in an e-mailed response to questions, declined to comment.
Citigroup Inc. and Morgan Stanley were hired to arrange the sale. Spokespeople at both banks declined to comment.
Other rights offers
Danamon’s plan for a rights offer follows the combined $4 billion that Singapore’s DBS Group Holdings Ltd. and CapitaLand Ltd. are tapping from existing shareholders.
DBS, Southeast Asia’s biggest bank, raised S$4 billion ($2.63 billion) from a rights offer last month after a slowdown in Singapore’s economy and rising provisions for losses on credit investments caused the bank’s steepest earnings decline in two years. The offer drew more bids than securities made available to existing holders.
CapitaLand, Southeast Asia’s largest property developer, last week said it will raise S$1.84 billion from a rights offer after fourth-quarter profit slumped 88 percent. Both DBS and CapitaLand’s shares were offered at a 45 percent discount.