After a third hearing in the Central Jakarta commercial court, Bakrieland Development bondholders indicated their legal action was spurred by the company’s decision not to pay its dues despite having sufficient resources.
The legal action, which may end in enforced bankruptcy proceedings for the Bakrie Group unit, came after investors holding $155 million in company-issued bonds noted a slew of asset sales.
An individual speaking on behalf of a committee representing bondholders, which include Cube Capital and the Bank of New York, said that Bakrieland had concluded asset sales worth hundreds of million of dollars but without allocating any proceeds to bondholders. The committee represents holders of more than 50 percent of the total 2010 issue of five-year unsecured equity-linked bonds, which came with a put option and a coupon rate of 8.625 percent. The person declined to be named as long as legal action continued.
The asset sales triggered concerns from bondholders as the transactions were performed without transparency, said the individual in a teleconference on Tuesday.
“There are significant delays in [providing] information,” the person said. Bondholders estimated that Bakrieland raised at least Rp 2.8 trillion ($245 million) in cash from selling assets in five transactions.
Proceeds from the asset sales were used to finance the Rp 3.1 trillion purchase of another property development company and to repay other creditors, the person said.
For that reason, bondholders decided in March to exercise their put option, which requires the company to repay the principal of the bond, the person said.
But Bakrieland failed to honor its obligation, despite having an estimated $1.7 billion in assets and $60 million in cash. The bondholders then filed a delayed debt payment petition (PKPU) with the commercial court.
The objective of the petition was to “restore some sort of transparency and to stop assets disposal by Bakrieland,” said the individual representing the bondholders. “We see that there are still opportunities for restructuring under the PKPU regime.”
Aji Wijaya, a lawyer representing Bakrieland, argued for the court to reject the legal action, saying that the case should be tried outside Indonesia. “Based on the original agreement between bondholders and Bakrieland, any dispute between both parties should be settled in England, not in Central Jakarta commercial court,” he said.