Bakrie Development May Go Bankrupt if No Debt Agreement is Reached
September 18, 2013 Leave a comment
Bakrie Development May Go Bankrupt if No Debt Agreement is Reached
By Investor Daily & Reuters on 10:09 am September 17, 2013.
Property firm Bakrieland Development will face its creditors in Central Jakarta commercial court today in an attempt to defeat a bankruptcy petition. The latest saga underscores the financial problems faced by Bakrie Group conglomerate, owned by presidential hopeful Aburizal Bakrie. A group of bondholders, including hedge fund Cube Capital, filed on Sept. 2 a delayed debt payment petition (PKPU) with the commercial court against Bakrieland over $155 million in bonds. The five-year unsecured equity-linked bonds were issued in 2010 with an annual yield of 8.625 percent.The creditors exercised a put option in March, in which Bakrieland is required to pay back the principal on the bond, but Bakrieland defaulted on its obligation.
The commercial court will today hear expert opinions put forth by both sides, and hear concluding arguments on Wednesday. The court’s decision on the petition is then due on Sep. 23.
Should the suing creditor’s petition be granted by the court, Bakrieland is required to propose a debt settlement plan to all of its creditors. According to Indonesian bankruptcy law, the court will declare the company bankrupt should it fail to get approval from all creditors for its plan.
Ambono Janurianto, Bakrieland’s president director, said that prior to the lawsuit the company had met with creditors to show good faith in fulfilling its obligations. “We still want to resolve this amicably,” Ambono told reporters on Monday.
However, at the last meeting between Bakrieland and the petitioning creditors, held on Aug. 28 in Hong Kong, Bakrieland offered to pay back only $31 million of the $155 million.
In lieu of paying the remaining debt, the company offered to put up 600 hectares of land in Bogor as guarantee, pending full payment, which it said it would only be able to make in 2016, Ambono said.
“They acknowledged the offer. But suddenly there was this lawsuit,” he said.
Bakrieland has Rp 16 trillion ($1.4 billion) in assets, sufficient to cover its debts, but was lacking cash, Ambono said.
“If we sell all the land to pay our debts, we would have to stop operations.”
Bakrie Group is involved in businesses ranging from coal mining and gas pipelines to palm oil plantations and property.
It has suffered bad publicity over allegations of tax evasion, accounting irregularities and responsibility for an environmental disaster at its Lapindo site in East Java.
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