IFC loses bankruptcy vote against Panca Overseas

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)