REPUBLIKA.CO.ID, JAKARTA/HONG KONG - Three buyers of a 380 million USD bond issued by a subsidiary of Indonesia's PT Bakrie Telecom Tbk have filed a lawsuit in the United States for alleged breach of terms.
The investors claim four Bakrie Group companies tied to the bond have failed to make two interest payments and have indicated they will continue to default on their obligations.
Bakrie Telecom is the latest Bakrie Group company struggling to repay debt. The group, often described as asset-rich but cash poor, have struggled in recent years due to a slide in coal prices and over-leveraged balance sheets.
Last month, group company PT Bumi Resources Tbk, Indonesia's biggest coal miner, narrowly avoided defaulting on a 375 million USD bond. In a filing dated Sept. 22, Universal Investment Advisory SA, Vaquero Master EM Credit Fund Ltd and Trucharm Ltd said they were suing Bakrie Telecom Pte Ltd, PT Bakrie Telecom Tbk, PT Bakrie Network and PT Bakrie Connectivity in a New York state court.
Bakrie Telecom Pte Ltd, a company organized under the laws of Singapore, issued the bond. It, PT Bakrie Network and PT Bakrie Connectivity are subsidiaries of PT Bakrie Telecom Tbk.
The three plaintiffs, which collectively hold more than 25 percent of the bond maturing May 2015, claimed the four Bakrie companies failed to pay interest due in November 2013 and May 2014.
"Defendants have acknowledged that the default will continue and no further interest payments will be made while the company confidentially negotiates with its chosen 'steering committee,' and a restructuring of the company and the note obligations is effectuated," the investors said in the filing.
"Accordingly, there is high probability that defendants will exacerbate the default and fail to make the next payment due in November 2014."
Analysts are sceptical about the enforceability of the outcome of the lawsuit.
"Judgements of foreign courts, including New York courts, are not enforceable in Indonesia," Fitch analyst Vicky Melbourne wrote in a recent report. "Few creditors have used the legal bankruptcy process in the past, opting instead for an out of court consensual restructuring."
PT Bakrie Telecom Tbk did not immediately respond to an email seeking comment and calls to the company went unanswered.
The lawsuit comes as PT Bakrie Telecom Tbk begins meeting with investors to propose restructuring the bond. PT Bakrie Telecom Tbk met with investors on Wednesday in Singapore at the offices of FTI Consulting Inc which is advising the company on its debt reorganization. One bondholder who was at the meeting said the company is proposing to split the bond into two parts.
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