Thu, 18 Jan 2001

IFC loses bankruptcy vote against Panca Overseas

JAKARTA (JP): PT Panca Overseas Finance (POF) survived a bankruptcy threat when the majority of its creditors approved its debt restructuring proposal on Wednesday.

Creditors representing more than two-thirds of POF's total debt of some US$235 million voted in favor of the company during a meeting at the Jakarta Commercial Court.

Nineteen creditors agreed to accept POF's debt restructuring proposal, 10 creditors were against the proposal, while two others abstained.

"We're very glad that creditors are willing to give Panca's management another chance," POF's legal representative, Swandy Halim of Lucas & Partners, told The Jakarta Post after the hearing.

He said that next Thursday the result of the vote would be handed over to the panel of judges at the court for ratification.

Under the Bankruptcy Law, a company survives a bankruptcy petition if the majority of its creditors -- representing at least two-thirds of the total outstanding debt -- vote to accept the company's debt restructuring proposal.

The International Finance Corporation (IFC), a subsidiary of the World Bank, filed a bankruptcy petition against POF last year for unresolved debts amounting to $13 million.

IFC said it took the financing company to court after two years of negotiations had failed to reach a debt restructuring agreement.

The World Bank's subsidiary earlier charged that POF used fictitious creditors to enable it win the vote at the commercial court.

According to Swandy, under the newly approved debt restructuring plan, creditors agreed to accept $40 million in total debt repayment within a three year period.

POF will pay installments of $10 million during the first and second years, with the remaining $20 million to be paid in the third year.

"The company is very optimistic that it can meet its target and repay some of its debts to all creditors," Swandy said.

Being a financing company, he explained, POF would raise the funds by collecting some of its financing facilities from various domestic and foreign parties.

According to him, POF has more than $40 million in loans channeled to various businesses, but he did not give an exact figure.

"We don't want to give creditors false hope by promising them more than we're able to recoup," he said.

Swandy said the $40 million stipulated in the debt restructuring deal was the most POF could raise, based on conservative estimates of its debtors' capability to repay their loans.

"Some companies we lend money to are financially sound, while others are not," he explained.

Responding to IFC's claims that fictitious creditors had participated in the vote on the restructuring deal, Swandy said that no one had been able to support these claims with proper evidence.

"We are open and willing to address these charges, but what we hear so far are only indications and suspicions," he said.

He added that such accusations must not interfere with the current court proceedings.

"What use is the court if unproven charges made outside the hearing can interfere with the court proceedings?" he asked.

IFC said it suspected POF had fabricated 14 of the 31 creditors, allotting them Rp 1.6 trillion (US$168 million) of the $230 million in total debt in order to influence the voting process.

It argued that the 14 creditors were paper companies that existed only to legalize questionable transactions.

IFC's legal representative, Luhut Pangaribuan, said the company would appeal to the Supreme Court if the panel of judges ratified the vote.

"The vote is not the end of the case, the results still require the approval of the panel of judges next week," Luhut said.

He said he would present the judges with documents unmasking the 14 fictitious creditors.

He did not elaborate, but IFC earlier reported its suspicions to the police, prompting a criminal investigation of POF.

Luhut said that with the presence of these large and allegedly fictitious creditors, IFC's proceeds from the debt restructuring plan would shrink to only 10 percent of its total loans.

POF is 50.5 percent owned by PT Panincorp, 22 percent by PT Panin Investment Enterprises Ltd. and 6 percent owned by IFC with the remaining shares owned by members of the public. (bkm)