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Indonesian courts have ruled in favour of international lenders battling a media company over a $560mn debt claim, in a case illustrating the risks faced by private creditors in the south-east Asian country.
Visi Media Asia, a subsidiary of the powerful conglomerate Bakrie Group, has sought to exclude a group of private creditors from participating in a court-supervised debt restructuring process and had challenged court rulings favouring the lenders.
The group of over 10 creditors including UBS, Hong Kong-based Tor Investment Management and US alternative credit investor Varde Partners, defeated a recent attempt by Visi to escalate the case to the country’s Supreme Court, paving the way for them to vote on any restructuring deal, according to a court document viewed by the Financial Times.
“We hope that the Bakrie Group engages in good faith and constructively in the restructuring discussions which we will now be voting on,” said a spokesperson for some of the lenders. Visi did not respond to a request for comment.
The dispute comes at a time Indonesia has been attracting billions of dollars in foreign investment as a result of its vast nickel reserves which have made it a critical player in global energy transition efforts.
There have been several high-profile cases of foreign lenders struggling to recoup their money in Indonesia. Domestic courts have in the past excluded international creditors from restructuring processes by denying them the right to vote on proposals.
In a rare move, the Commercial Court in central Jakarta ruled in favour of Visi’s foreign lenders in July and August, asking the media company run by founder and president director Anindya Novyan Bakrie, the son of businessman and politician Aburizal Bakrie, to recognise the claim from the group of creditors.
Visi challenged the ruling by filing a request with the court registrar in late August to appeal against the decision to the country’s Supreme Court, according to the international lenders.
Visi is “manipulating legal rules”, said the group of private creditors in an August letter to various courts and legal agencies in Indonesia urging against the escalation of the case to the Supreme Court. “This manipulation has clearly damaged the legal framework and business law in Indonesia and set a bad precedent,” said the letter.
In response, Indonesia’s directorate general of general courts ruled that the request filed by Visi “does not meet the formal requirements” and will not proceed further to the Supreme Court, according to a court document dated September 6.
While Visi has failed in attempts to challenge the court rulings, there remains a possibility that it could try other legal measures to exclude the private creditors from the restructuring deal.
“We hope that the incoming government takes note of the significant damage being done to Indonesia’s prospects for foreign direct investment,” said a spokesperson for the lenders.
President Joko Widodo is set to hand over the presidency to Prabowo Subianto on October 20. Prabowo, a former military general who won an election this year, has promised to focus on investor-friendly policies and is targeting to boost economic growth to 8 per cent from the current 5 per cent.
Visi first incurred the debt in 2013 when it took out a loan worth $230 million, which was then refinanced in 2017. The lenders have said Visi defaulted on the loan in 2018.
Additional reporting by Diana Mariska in Jakarta
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