By Eveline Danubrata and Umesh Desai
JAKARTA/HONG KONG (StartName) – Investors have filed a lawsuit in the United States against Indonesia’s PT Bakrie Telecom Tbk and associated companies for allegedly breaching the terms of a $380 million bond, by failing to make two interest payments and indicating that it will continue to default on its obligations.
Universal Investment Advisory SA, Vaquero Master EM Credit Fund Ltd and Trucharm Ltd are suing Bakrie Telecom Pte Ltd [BTELB.UL], PT Bakrie Telecom Tbk, PT Bakrie Network and PT Bakrie Connectivity in a New York state court.
PT Bakrie Telecom Tbk is the parent of Bakrie Telecom Pte Ltd, a company organised under the laws of Singapore that issued the bond. PT Bakrie Network and PT Bakrie Connectivity are subsidiaries of PT Bakrie Telecom Tbk.
PT Bakrie Telecom Tbk did not immediately respond to an email seeking comment and calls to the company went unanswered.
The three plaintiffs, which collectively hold more than 25 percent of the outstanding bond maturing in May 2015, claimed the Bakrie Group 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 New York lawsuit in Indonesia.
“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 is unlikely to be able to refinance the $380 million bond due to its weak financial position and liquidity, and the company’s best course of action would be to make a deal, analysts said.
PT Bakrie Telecom Tbk is currently considering merging with PT Smartfren Telecom Tbk, local media reported on Wednesday, quoting a Bakrie Telecom director.
“An M&A looks difficult as the company (Bakrie Telecom) is continuously losing subscribers and posting weaker financial performance every quarter,” said Nitin Soni, a Fitch analyst. But it may pursue a deal with Smartfren as the companies use similar technology, Soni said.
Smarfren Corporate Secretary James Wewengkang was not immediately available to comment, his secretary said.
(Additional reporting by Fransiska Nangoy in JAKARTA and Rachel Armstrong in SINGAPORE; Editing by Christopher Cushing)