Bakrie Telecom, owner of mobile service provider Esia, has been bogged down by heavy disputes with its noteholders for years. (Antara Photo/Alfan)
US Court Grants Recognition of Bakrie Telecom's Indonesian Debt Restructuring Scheme
BY :MUHAMAD AL AZHARI
APRIL 25, 2019
Jakarta. The United States Bankruptcy Court granted a request last week by telecommunications firm Bakrie Telecom for recognition of its Indonesian debt restructuring scheme.
The April 19 ruling by Judge Sean Lane of the Southern District of New York overruled a challenge by six holders of the company's $380 million notes – Universal Investment Advisory, Universal Absolute Return, Vaquero Master EM Credit Fund, Harshil Kantilal Kothari, Footbridge Capital and the Growth Credit Fund.
Bakrie Telecom, an Indonesian provider of fixed digital radio cellular telecommunication services and controlled by the Bakrie Group, has been bogged down for years by heavy disputes with its noteholders.
The case dates back to 2010, when the Indonesian conglomerate set up a special-purpose vehicle, Bakrie Telecom, to sell a $380 million global bond in New York. Proceeds from the bond sale were paid over to the Jakarta-based parent under an intercompany loan deal.
The trouble started when Jakarta-listed Bakrie Telecom and three subsidiaries failed to make two interest payments on the global bond, due in November 2013 and May 2014, respectively.
The noteholders won a $161.6 million judgement against Bakrie Telecom in a case filed in the New York State Court in September 2014. They accused the company of having misstated its financial position when offering the bonds four years earlier.
On the other side of the globe meanwhile, just a month after the New York case was filed, a different creditor filed a petition in a Jakarta court to push Bakrie Telecom into a debt restructuring scheme, known locally as a PKPU. The company secured approval from the Central Jakarta Commercial Court to restructure $780 million of its debt, including the disputed notes.
On Jan. 29 last year, Bakrie Telecom filed a Chapter 15 bankruptcy petition in New York to secure recognition of this debt restructuring plan – a move opposed by dissatisfied noteholders, who tried to convince Judge Lane not to recognize the scheme as a foreign main proceeding. They claimed the case involved a "complete disenfranchisement" of noteholders.
However, in his bench ruling, Judge Lane determined that Bakrie Telecom's note indenture met the eligibility requirements for a Chapter 15 bankruptcy petition, which is an addition to the 2005 US Bankruptcy Code that addresses international bankruptcy matters. The judge also found that Bakrie Telecom's foreign representative had been appointed appropriately in the course of its restructuring.