Distressed Funds Make Japanese Savior of Indonesian Bank Pay Up

Two distressed-debt investors based in Mauritius won a local ruling to recover defaulted payments by Indonesia’s PT Bank Mutiara from its Japanese rescuer.

Tokyo-based financial services company J-Trust Co. was ordered to pay $112.5 million of legacy debts and costs to First Global Funds Ltd. and Weston International Asset Recovery Co., according to an e-mailed statement from Weston on Thursday. J-Trust, which specializes in buying ailing firms, acquired Bank Mutiara last year for 4.45 trillion rupiah ($335 million).

The ruling is the latest chapter in a saga stretching back to 2008, when Indonesia bailed out the now defunct Bank Century, which transformed into Mutiara, after it couldn’t meet debt obligations. It’s a stark reminder to investors about the risks of recovering debt in Indonesia, where companies defaulted on $2.3 billion of dollar bonds in the past seven years.

“First Global’s directors are committed to achieving full payment and enforcement of these summary judgments,” John Liegey, a director at Weston said in the statement.

Yuko Yoshida, in J-Trust’s investor relations department, said she couldn’t comment on the lawsuit.

The judgment was also against Lembaga Penjamin Simpanan, Indonesia’s depositor insurance agency which seized control of Bank Century, and Bank Mutiara. Samsu Adi Nugroho, the corporate secretary at LPS, said on Thursday they hadn’t received formal letters from the Mauritius court. Given that J-Trust took over Bank Mutiara last year, any lawsuit against Bank Century should be the Japanese buyer’s problem, he said.

Hartono Karyatin, the corporate secretary at Bank Mutiara, also said the lender hadn’t received court notification and so wasn’t able to comment.

Jail Sentence

The Bank Century debacle sent shockwaves through Indonesia’s financial system and its political elite for years afterward. In 2014, former central bank deputy governor Budi Mulya was sentenced to 10 years in jail for corruption. He was also fined 500 million rupiah over decisions relating to the government’s $573 million bailout.

J-Trust paid 4.4 times the book value of Bank Mutiara’s equity, according to Bloomberg-compiled data. The lender reported negative operating income for the past two years.

Indonesia Seizes Century as Capital Deteriorates (Update1) Weston International Files Suit Against Bank Mutiara, J Trust Bank Mutiara Shareholders Approve Ownership Transfer to J Trust

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