Trikomsel Plan Riles Bondholders as Court Rejects Claims

Some bondholders of PT Trikomsel Oke said they were “disappointed” with the decision by an Indonesian court to reject their claims after the phone retailer sought to suspend its debt obligation following a default on two bonds last year.

Jakarta-based Trikomsel obtained protection in January under Indonesia’s debt suspension proceeding known as PKPU, part of the country’s insolvency law that allows a petitioner up to 270 days to implement a restructuring. Trikomsel missed coupon payments on S$115 million ($82.7 million) of 2016 notes in November and on S$100 million of 2017 notes in December. The securities were issued by a Singapore unit and on-lent to an Indonesian affiliate.

“We were disappointed to learn that Trikomsel has convinced the PKPU administrators to recognize its affiliate Trisatindo’s purportedly ‘secured’ intercompany claim related to the proceeds of the notes,” according to an e-mailed statement from law firm O’Melveny & Myers LLP on behalf of a noteholder steering committee. “This treatment benefits the company at the expense of legitimate creditors and is not fair and equitable to noteholders.”

The PKPU outcome represents yet another hurdle for investors trying to recoup their monies from Indonesian defaulters, a situation that first surfaced and challenged by foreign hedge funds when PT Bakrie Telecom pushed through a debt-to-equity swap after defaulting on $380 million of bonds in December 2014. Before Trikomsel, Indonesian borrowers had reneged on $7.5 billion of dollar-denominated bonds since the 1997 Asian financial crisis, according to Bloomberg data.

Debt Failures

The 2016 notes were indicated at 20 cents on the local dollar, while the 2017 notes fetched 17 cents, according to Bloomberg-compiled prices. The debentures were sold in 2013 and 2014 at 100 cents. The default was the first involving notes in Singapore dollars since 2009, when Celestial Nutrifoods Ltd. and Sino-Environment Technology Group Ltd. reneged on bond obligations, data compiled by Bloomberg show.

Trikomsel hired FTI Consulting and Ashurst LLP to advise on a debt restructuring plan, after citing weakening earnings and cash flows due to a slowdown in the economy and a slump in the rupiah for its financial strain. The currency has gained 2.6 percent this year, after falling 10.2 percent in 2015.

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