Bakrie Telecom Creditors Vote on Debt-to-Equity Swap Plan

Creditors of PT Bakrie Telecom, the Indonesian wireless network provider that defaulted on bonds a year ago, will vote today on a plan to convert the majority of the company’s debt to equity.

The unit of coal-to-property conglomerate Bakrie & Brothers, controlled by one of Indonesia’s most influential business families, plans to convert 70 percent of its debt into stock at a price of 200 rupiah (2 cents) per share, according to company adviser Joel Hogarth of Ashurst LLP. The remaining 30 percent of obligations would be amortized over five years under the plan, Hogarth said in an interview today.

The vote is the latest test after investors holding more than 25 percent of Bakrie Telecom’s $380 million of defaulted bonds filed a complaint in New York on Dec. 5 opposing a previous version of the debt restructuring plan, documents seen by Bloomberg News show. It flags broader financial stress in the Bakrie group, after a mining unit sought court protection to reorganize $1.375 billion of bonds and a property arm missed a coupon payment on $155 million of notes last year.

Bondholders in the New York complaint claim their principal would be reduced to between 7 cents and 19 cents on the dollar under Bakrie’s proposal, the documents show.

Bakrie Telecom will strongly resist “unsubstantiated claims by a small minority of unidentified holdouts whose agenda is entirely opaque,” said Hogarth. It hasn’t seen the lawsuit yet, Singapore-based Hogarth said.

Prices Drop

“We are reviewing this development and will comment in due course,” Chris Fong, a Bakrie group spokesman in Jakarta, said by e-mail today.

The price of the company’s May 2015 notes, on which it missed a coupon payment last year, has slid 40 percent this year to 9.276 cents on the dollar as of Dec. 5, Bloomberg-compiled prices show.

The new restructuring draft was openly presented in an Indonesian court on Dec. 5 and “is available to all creditors,” Hogarth said.

The debt-to-equity swap is fair to all creditors and is being conducted in accordance with established local court rules and procedures, he said.

The Bakrie family is led by Aburizal Bakrie, who heads Indonesia’s Golkar Party and didn’t win the ticket to participate in presidential elections in July. His father Achmad started the Bakrie group in 1942, trading rubber and coffee, before expanding to steel, energy and property. Aburizal struggled to repay $1.1 billion of debt when currencies plunged in the 1997 Asian financial crisis, and was forced to relinquish most of the family assets to creditors.

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