Supreme Court's ruling on Dharmala upsets experts<\/p>\n
JAKARTA (JP): An insolvency expert and financial analysts
\ndeplored on Tuesday the Indonesian Supreme Court's latest verdict
\nwhich rejected a bankruptcy appeal by the International Finance
\nCorporation and other creditors against PT Dharmala Agrifood.<\/p>\n
They said the appeal ruling did not bode well for impatient
\noffshore creditors struggling to recover debts from Indonesia's
\ntroubled firms.<\/p>\n
Jerry Hoff, an insolvency expert of Loeff Claeys Verbeke law
\nfirm, said most foreign creditors were very disappointed with the
\nruling which could have an adverse impact on the lending and
\nborrowing climate in the future.<\/p>\n
\"A lot of my clients are very disappointed with the bankruptcy
\ncourt ruling,\" he told The Jakarta Post on Tuesday.<\/p>\n
\"I fear that it will have a very negative impact on the
\nborrowing capacity of Indonesian firms trying to secure credits
\nin the future,\" he said.<\/p>\n
The Supreme Court on Monday turned down an appeal by IFC --
\nthe private investment arm of the World Bank -- together with ING
\nIndonesia Bank and publicly listed Bank Niaga to declare food
\nproducer Dharmala Agrifood bankrupt.<\/p>\n
The three banks filed an appeal petition with the Supreme
\nCourt after their initial bankruptcy claim against the listed
\nIndonesian agricultural food producer was thrown out by the
\nJakarta Commercial Court early December.<\/p>\n
The commercial court ruled that the loans of IFC and ING
\nIndonesia Bank to Dharmala Agrifood, totaling US$51.7 million,
\nwere not \"due and payable,\" a prerequisite for a bankruptcy
\nclaim.<\/p>\n
It further ruled that the claim of Bank Niaga over its loans
\nworth Rp 16.04 billion (US$2.1 million) to Dharmala Agrifood was
\n\"null and void\" because the credit agreement was granted to cover
\nforeign exchange losses and such an arrangement breached Bank
\nIndonesia's regulations on derivative transactions.<\/p>\n
Hoff, one of the insolvency trainers for Indonesian bankruptcy
\njudges, noted that as seen from their rulings, the judges had not
\nacquired full knowledge of the bankruptcy law.<\/p>\n
\"What's more to the point is that I have trained all the
\nIndonesian judges but their rulings have disappointed me,\" he
\nsaid.<\/p>\n
He said the Indonesian government should quickly take drastic
\nand comprehensive steps to improve the bankruptcy court as
\nfailure to do so would pose more difficulties for the country's
\neconomy.<\/p>\n
\"I am curious to know what the Indonesian government is
\nthinking of this negative development,\" he said.<\/p>\n
David Chang of Trimegah Securindolestari and Eddy S. Widjojo
\nof Mashill Jaya Securities agreed and said the Supreme Court's
\nruling on Dharmala Agrifood could serve as a bad precedent in the
\neyes of offshore creditors.<\/p>\n
They said that the bankruptcy court, which was originally
\ndesigned to help offshore creditors settle their credits with
\ndebt-ridden domestic firms, has not worked properly as intended
\nsince its inception in August last year.<\/p>\n
\"The decision seems to be against foreign creditors. But it is
\nthe Indonesian borrowers that will have more difficulties in
\nsecuring credits in the future,\" Chang told the Post.<\/p>\n
\"Or even if they want to secure credits, there will be more
\ndifficulties and costs will be very high.\"<\/p>\n
Eddy added that the ruling would further weaken foreign
\ninvestor confidence in Indonesia's legal process. And it could
\nalso hamper new lending for the country's corporations.<\/p>\n
Nevertheless, lawyers and analysts said they were not
\nsurprised at the Supreme Court's ruling largely because the
\ncommercial court had handed down several decisions that were
\nviewed as controversial.<\/p>\n
As of the end of January, 38 bankruptcy cases had been filed,
\nand 12 companies had been declared bankrupt, mostly small
\ncompanies. Bigger companies, however, appeared to get off the
\nhook easier.<\/p>\n
Notable among the controversial verdicts was one involving the
\nbankruptcy petition filed by an American Express Bank-led
\nconsortium against PT Ometraco Corporation, where the court threw
\nout the case on the grounds that the banks filed two separate
\nbankruptcy petitions instead of one lawsuit to cover both the
\nOmetraco Corp and its unit PT Ometraco Multi Artha, the group's
\nfinance subsidiary. (aly)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/supreme-courts-ruling-on-dharmala-upsets-experts-1447893297",
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