IFC confident of victory in Indonesian debt case
IFC confident of victory in Indonesian debt case
JAKARTA (Reuters): The World Bank's private sector lending arm is confident of final victory in a drawn out bankruptcy case highlighting the trouble creditors have getting Indonesian debtors to pay up.
"We have faith in the courts that justice will ultimately prevail," the International Finance Corporation's chief of special operations, Charles van der Mandele, told Reuters in an interview on Monday.
Van der Mandele expects that the IFC may have to go all the way to the Supreme Court to do so.
But he said that even if the IFC won the Panca case, the arduous road to victory and the high failure rate of the bankruptcy laws in tackling recalcitrant debtors, boded ill.
"The impact will be that a lot of creditors are going to throw up their hands and maybe settle at ridiculously low prices but in the long run it undoubtedly means a lot of creditors will think twice before they make loans to Indonesia," he added.
Only a handful of creditors, including Indonesia's powerful bank restructuring agency (IBRA), have won bankruptcy cases since new laws were introduced in 1998.
The IFC has been haggling over $13 million owed to it by PT Panca Overseas Finance for two years and eventually filed a bankruptcy petition on Sept. 6 after negotiations failed.
Its petition suffered a blow last week when a majority of creditors voted in the Jakarta Commercial Court to accept Panca's debt rescheduling program.
The commercial court will decide on Tuesday whether to ratify last week's vote.
The IFC is challenging that vote, arguing that not all the creditors who took part were genuine creditors.
"The composition plan has to be approved by 51 percent of creditors representing two-thirds of the debt," van der Mandele said.
The IFC has a 6 percent stake in Panca, which is majority owned by PT Panincorp and has a total debt of $235 million, spread among 19 creditors.
Lawyers for Panca were not available to comment on the IFC challenge to the debt rescheduling plan vote.
Van der Mandele said that the Panca case also put the spotlight on the government's corporate debt workout unit, the Jakarta Initiative Taskforce (JITF), which had to remove Panca from its books once court proceedings began.
The taskforce, which has restructured a cumulative $9.4 billion in debts since its inception in April 1998, acts as a mediator between debtors and creditors but has no power to enforce settlements.
The JITF said the Panca case was in the early stages of mediation but could not comment further.
More generally, JITF chief operating officer Samuel Tobing said he was perturbed by the ineptitude of the courts.
"If we were beginning to see quality decisions coming out of the courts then we would be in better shape. But if courts cannot issue quality decisions then we don't have a very good outlook for the restructuring process," said Tobing.
The JITF is charged with restructuring a total of $12 billion of debt by April this year, under a set of economic reforms agreed with the International Monetary Fund.