In re PT Bakrie Telecom TBK

• Decision Date: 15 April 2021
• Docket Number: Case No. 18-10200 (SHL)
• Parties: IN RE: PT BAKRIE TELECOM TBK, Debtor in a Foreign Proceeding.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

628 B.R. 859

IN RE: PT BAKRIE TELECOM TBK, Debtor in a Foreign Proceeding.

Case No. 18-10200 (SHL)

United States Bankruptcy Court, S.D. New York.

Signed April 15, 2021

SCHNADER HARRISON SEGAL & LEWIS LLP, Counsel for Jastiro Abi as Foreign Representative, 140 Broadway, Suite 3100, New York, New York 10005-1101, By: Kenneth R. Puhala, Esq., Theodore L. Hecht, Esq. -and- 1600 Market Street, Suite 1600, Philadelphia, Pennsylvania 19103, By: Richard A. Barkasy, Esq.

GREENBERG TRAURIG, LLP, Counsel for Universal Investment Advisory SA, Universal Absolute Return SP, Vaquero Master EM Credit Fund, Ltd., Harshil Kantilal Kothari, Footbridge Capital, LLC and Growth Credit Fund IC, 200 Park Avenue, New York, New York 10166, By: James W. Perkins, Esq., Anne C. Reddy, Esq., Ryan A. Wagner, Esq., Elizabeth J. Sullivan, Esq.

BAKER MCKENZIE, Counsel for Universal Investment Advisory SA, Universal Absolute Return SP, Vaquero Master EM Credit Fund, Ltd., Harshil Kantilal Kothari, Footbridge Capital, LLC and Growth Credit Fund IC 1111 Brickell Avenue, Suite 1700, Miami, Florida 33131, By: Mark D. Bloom, Esq. (pro hac vice)

POST-TRIAL MEMORANDUM OF DECISION

SEAN H. LANE, UNITED STATES BANKRUPTCY JUDGE

Before the Court is the proposed foreign representative Jastiro Abi's (the "Foreign Representative") request for recognition of a foreign insolvency proceeding in Indonesia as a foreign main proceeding under Chapter 15 of the United States Bankruptcy Code. The Foreign Representative also requests additional relief under Sections 1521 and 1507 of the Bankruptcy Code in the form of enforcement of the Indonesian court-approved debt restructuring plan, or the PKPU Plan ("PKPU" defined infra ). The PKPU Plan was approved by a judgment of the Central Jakarta Commercial Court (the "Commercial Court") and then affirmed by the Supreme Court of the Republic of Indonesia (the "Indonesian Supreme Court"). A group of noteholders object to the grant of recognition and additional relief on multiple grounds.¹

After a decision denying the Objecting Noteholders' request for summary judgment, In re PT Bakrie Telecom Tbk , 601 B.R. 707 (Bankr. S.D.N.Y. 2019), the Court held a trial in this matter. Based on the evidence and applicable law, and for the reasons that follow, the Court recognizes the foreign proceeding as a foreign main proceeding under Section 1517 of the Bankruptcy Code but denies the additional relief requested by the Foreign Representative under Sections 1521 and 1507 of the Bankruptcy Code. This decision constitutes the Court's findings of fact and conclusions of law.

BACKGROUND

The Parties submitted a Joint List of Stipulated Facts, see Joint List of Stipulated Facts, Ex. A (the "Stipulation") [ECF No. 102], and then presented additional evidence at Trial.² The facts below are taken from both sources.

PT Bakrie Telecom Tbk ("BTEL" or the "Debtor"), the foreign debtor, is an Indonesian company in the business of providing a fixed digital radio cellular telecommunications national network and services, but currently has only very limited business activities and negligible revenue. Jastiro Abi Witness Statement ("Abi Testimony") ¶¶ 1, 5 [ECF No. 93]. BTEL's financial difficulties and eventual restructuring efforts stem from a default on payments due under certain senior notes. In May 2010 and January 2011, Bakrie Telecom Pte. Ltd. (the "Issuer"), a wholly-owned subsidiary of BTEL, issued—on behalf of BTEL—two international debt offerings (the "Offering") totaling $380 million in 11.5% Guaranteed Senior Notes due in May 2015 (the "Notes"). Stipulation ¶¶ 1, 10. The Notes were issued under an indenture and a supplemental indenture (together, the "Indenture") governed by New York law. Id. ¶¶ 1, 2. The Bank of New York Mellon (the "Indenture Trustee") is the trustee under the Indenture. Id. ¶ 3. The Indenture authorizes the Indenture Trustee to submit proofs of claim on behalf of the noteholders in a restructuring proceeding. See id. ¶ 51. Under the Indenture, the right of a noteholder to receive payment, among other things, cannot be impaired or affected without the noteholder's consent. Stipulation ¶ 72. The Indenture further provides that "[w]ithout the consent of the holders of at least a majority in aggregate principal amount of the Notes then outstanding, the [I]ssuer and [BTEL] will not ... amend, modify, or alter the Intercompany Loan [defined below] in any manner adverse to the holders of the Notes ...." Id. ¶ 73.

On the same dates that the Indenture was executed, the Issuer loaned the proceeds of the Offering to its parent company, BTEL, under an Intercompany Loan Agreement and a Supplemental Intercompany Loan Agreement (together, the "Intercompany Loan Agreements"). Id. ¶ 12. The Intercompany Loan Agreements are governed by Indonesian law. Id. ¶ 13. Jastiro Abi, the proposed Foreign Representative, was a Director of both BTEL and the Issuer during the Offering; he executed the Indenture and the Intercompany Loan Agreements on behalf of BTEL and executed the Notes on behalf of the Issuer. Id. ¶¶ 4–5, 11, 14.

The Issuer and Indenture Trustee then entered into an Assignment of Intercompany Loan Agreement (the "Assignment") and subsequently a Supplemental Assignment of Intercompany Loan Agreement (the "Supplemental Loan Assignment," and together, the "Assignments"), both governed by Singapore law and both executed by Mr. Abi on behalf of the Issuer. Id. ¶¶ 15–17. Under the Assignments, the Issuer assigned its rights against BTEL under the Intercompany Loan Agreements to the Indenture Trustee. Id. ¶¶ 52–54. BTEL had notice of the Assignments. Id. ¶ 18. Additionally, BTEL guaranteed repayment of the Notes under a Parent Guarantee, while two of its subsidiaries, PT Bakrie Network and PT Bakrie Connectivity (the "Subsidiary Guarantors"), also guaranteed repayment of the Notes under a Subsidiary Guarantee. Id. ¶ 21. Both Guarantees are governed by New York law. Id. ¶ 22. Of particular note for this case, the Parent Guarantee provided noteholders and the Indenture Trustee direct recourse to BTEL without requiring them to pursue the Issuer for non-payment. See id. ¶ 23. Mr. Abi executed the Parent Guarantee on behalf of BTEL and understood that BTEL was obligated to repay the Notes if the Issuer failed to do so. See id. ¶ 24.

When BTEL began to encounter financial difficulties, it was forced to write down the value of its assets in 2012 and 2013. See id. ¶ 25. BTEL, the Issuer, and the Subsidiary Guarantors ultimately defaulted on scheduled interest payments due on the Notes in November 2013 and May 2014; these default interest payments remain outstanding. See id. ¶¶ 26–27. Before the scheduled payment in May 2014, BTEL issued a written notice to all noteholders stating that (i) it was engaged in discussions with a steering committee of key noteholders (the "Steering Committee") regarding the current financial and operational position of the company and a potential restructuring of the Notes, and (ii) it would not be making any further interest payments on the Notes pending the resolution of such discussions. See id. ¶¶ 30, 34. Just prior to the defaults, BTEL had engaged with a financial consultant, FTI Consulting ("FTI"), to "develop[ ] and negotiat[e] a debt restructuring proposal" and act as the "primary contact person with the Senior Noteholders (or their advisors) through the restructuring negotiation." Id. ¶ 28. In response, the Objecting Noteholders—who are purportedly purchasers and beneficial holders of some $106 million in the face amount of the Notes, or over 25% of the outstanding $380 million in Notes issued—and three other noteholders formed an ad hoc committee of noteholders (the "Ad Hoc Committee") to engage in discussions with BTEL about its financial and operational plans. See id. ¶¶ 1, 36, 42; see also Abi Testimony ¶¶ 7, 55; Gregorious Petrus Aji Wijaya Witness Statement ¶ 53 ("Wijaya Testimony") [ECF No. 94]; Written Testimony of Kevin Omar Sidharta as Expert Witness for Objecting Noteholders ¶ 47 ("Sidharta Testimony") [ECF No. 99]; Written Testimony of Defrizal Djamaris as Witness for Objecting Noteholders ¶ 36 ("Djamaris Testimony") [ECF No. 100-1]. In the summer of 2014, the Ad Hoc Committee worked with BTEL and its financial consultant to conduct due diligence and evaluate the merits of BTEL's restructuring efforts. See Stipulation ¶¶ 37-40. The Ad Hoc Committee and BTEL entered into a Memorandum of Understanding and a Confidentiality Agreement, under which FTI populated a data room for the Ad Hoc Committee to perform due diligence. See id. ¶¶ 37, 39. But by August 2014, discussions between BTEL and the Ad Hoc Committee had broken down. See id. ¶ 40.

In September 2014, three of the Objecting Noteholders commenced litigation in New York state court against BTEL, the Issuer, and the Subsidiary Guarantors for breach of the Notes. See id. ¶ 41. They subsequently issued to and served on BTEL, the Issuer, and the Indenture Trustee a notice of acceleration declaring all principal and interest immediately due and owing under the Notes and demanding immediate payment.³ See id. ¶ 42. After another interest payment default in late 2014, the Indenture Trustee also issued to the Issuer, BTEL, and the Subsidiary Guarantors a Notice of Acceleration, which demanded immediate payment. Id. ¶ 43.

One month after the New York litigation commenced, an Indonesian creditor, PT Netwave Multi Media ("Netwave"), to whom BTEL owed approximately $400,000, initiated a "Penundaan Kewajiban Pembayaran Utang"⁴ ("PKPU") proceeding against BTEL (the "PKPU Proceeding") in the Indonesian Commercial Court. Id. ¶¶ 44–45, 50. A PKPU proceeding is a court-enforced suspension of payments process in Indonesia that is designed to provide a debtor with a definite period of time to restructure its debt and reorganize its affairs under a composition plan with its creditors. See Abi Testimony ¶ 25. After the PKPU petition was filed, FTI advised the proposed...