IFC loses bankruptcy battle with POF
JAKARTA (JP): The International Finance Corporation (IFC), the commercial financing arm of the World Bank, lost its legal battle with publicly listed PT Panca Overseas Finance (POF) when a commercial court rejected its bankruptcy petition on Tuesday.
The Central Jakarta Commercial Court approved a vote by POF's creditors to accept the company's debt restructuring proposal.
Syamsudin Manan Sinaga, the chief judge at the court, ruled in favor of Panca, saying the court's priority was to seek a win-win solution for creditors and debtors.
IFC legal representative Luhut Pangaribuan criticized the court for ignoring IFC's suspicion that fictitious creditors took part in last week's vote.
"We are going to appeal the ruling," Luhut told The Jakarta Post following the hearing.
He said IFC would file an appeal with the Supreme Court within eight days.
He said that according to Article 284 of the bankruptcy law, creditors who reject a debtor's debt restructuring proposal but lose the vote on the proposal are allowed to appeal the decision.
Luhut added that according to the bankruptcy law, the Supreme Court must respond to IFC's appeal within 30 days of receiving it.
The IFC filed a bankruptcy petition against POF last year for unresolved debts amounting to US$13 million.
IFC said it took the financing company to court after two years of negotiations had failed to produce a debt restructuring agreement.
The company suspects POF fabricated 14 of its 31 creditors, allotting them Rp 1.6 trillion (about $170 million) of its $230 million in total outstanding debts.
It said the move enabled POF to win the creditors' vote accepting its debt restructuring proposal.
According to POF, under its debt restructuring proposal creditors agree to accept $40 million in debt repayment over a period of three years.
The company will pay installments of $10 million in the first and second years, with the remaining $20 million to be paid in the third year.
The company has said it will raise the funds by recouping loans it has channeled to domestic and foreign parties.
Luhut questioned the chief judge's objectivity, citing the inclusion of an opinion of the Indonesian Securities Investor Society (MISSI) among the considerations he used in making his decision.
MISSI held a media conference on Monday urging the court not to approve the bankruptcy petition against POF, saying ruling against the company would harm the interests of investors.
"The judge is not allowed to consider the opinions of parties other than those directly involved in the case," Luhut said.
As with a jury in the U.S. legal system, he said, a judge must be isolated from opinions expressed outside the court proceedings.
POF spokesman Harry Ganda said the company was relieved to have survived the bankruptcy petition.
He also urged IFC not to be suspicious of Syamsudin's verdict, saying the judge had acted on the basis of fairness.
"You heard what MISSI said about the harm of declaring POF bankrupt," he said.
On the charge of fictitious creditors, Harry said earlier IFC was never able to prove its allegations with evidence that these creditors did not exist.
Nevertheless, the alleged involvement of fictitious creditors in the bankruptcy process has dealt another blow to the country's legal system.
The Indonesian Bank Restructuring Agency (IBRA), which deals with numerous bankruptcy cases, voiced its concerns with the POF case.
The agency is in charge of recouping nonperforming loans from several major local banks, and files bankruptcy petitions against uncooperative debtors.
The head of IBRA's legal division, Robertus Bilitea, warned that the agency's debtors might be tempted to use fictitious creditors to avoid bankruptcy.
"Providing that POF has indeed fabricated its creditors, we will surely be on the lookout for similar schemes," he said.
In the wake of the POF decision, he said, IBRA will take further precautions when preparing its bankruptcy cases. (bkm)