Commercial Court asked to cancel Fiskaragung's agreement

JAKARTA (JP): Court receiver of the now insolvent PT Fiskaragung Perkasa is asking the Commercial Court to cancel the US$3 million loan agreement between the salt producer and its Hong Kong creditor, Catnera International Ltd.

Rafael Adrian, the lawyer representing the court receiver, said on Wednesday the signing of the 1999 loan agreement between Fiskaragung and Catnera breached the previous agreement the salt producer had with other creditors.

"The previous loan agreement banned Fiskaragung from borrowing money from other creditors until it repaid the existing loans," Adrian said after the court hearing over the case.

The hearing has been adjourned until next Monday when they hope to receive a written legal reply from the defendant.

Adrian said the controversial loan agreement involved a pledging of all the company's main fixed assets to the new creditor.

Creditors holding pledged assets as collateral have the preferred rights in the distribution of the liquidated assets of the insolvent company, according to the 1998 Bankruptcy Law.

These creditors with preferred rights would be entitled to the proceeds from the sale of the assets pledged to them, while the other creditors who hold no collateral would get the proceed from the sale of the remaining unpledged assets, the law said.

In the Fiskaragung case the creditors outside Catnera risked not receiving any proceeds from its asset sale of the company liquidation because they did not have any assets pledged to them, according to Adrian.

"All the other creditors gave a total loan amount of over $30 million to Fiskaragung, while Catnera only gave $3 million," said Adrian.

Lucas S.H., lawyer representing Catnera, said it was the fault of those other creditors who had lent money to Fiskaragung without any collateral.

"Catnera extended loans to Fiskaragung with collateral, the other creditors did not. So, it is their problem," Lucas said.

Adrian argued that all the other creditors did not require any collateral, but instead required Fiskaragung to never pledge its asset to anybody else.

"But what has happened now is that Catnera has all Fiskaragung's assets pledged to them as collateral," he said.

However Adrian said the validity of the Catnera "collateral- based" loan agreement was weak as it was signed less than one year prior to the company being declared bankrupt by the Jakarta Commercial Court.

"Any action which undermined the company total asset value, and was done during the past year prior to its court-granted insolvency status, should be canceled by the court," said Adrian quoting the one-year "retroactive rule" as stipulated in the 1998 Bankruptcy Law.

Fiskaragung was declared bankrupt by the court in late November last year, where the loan agreement with Catnera was signed in March of the same year, he added.

However Lucas said that the retroactive rule should not be filed against a fellow creditor.

Perhaps if Fiskaragung sold some of its assets to a third party, then the one-year retroactive rule could be applied here, Lucas implied.

"Catnera is not a third party to Fiskaragung, it is a creditor," Lucas said.

Fiskaragung was delisted from the trading board of the Jakarta Stock Exchange following its being declared bankrupt late last year.

Its total asset, according to the latest valuation of the court receiver Makarim & Taira law firm stood at below $3 million. (udi)