In re PT Bakrie Telecom Tbk

• Decision Date: 13 May 2019
• Docket Number: Case No. 18-10200 (SHL)
• Citation: 601 B.R. 707
• Parties: IN RE: PT BAKRIE TELECOM TBK, Debtor in a Foreign Proceeding.
• Court: U.S. Bankruptcy Court — Southern District of New York

601 B.R. 707

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 May 13, 2019

As corrected May 30, 2019

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.

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, 333 S.E. 2^nd Avenue, Miami, Florida 33131, By: Mark D. Bloom, Esq. -and- 200 Park Avenue, New York, New York 10166, By: James W. Perkins, Esq., Anne C. Reddy, Esq.

CORRECTED MODIFIED BENCH DECISION DENYING MOTION FOR SUMMARY JUDGMENT ¹

SEAN H. LANE, UNITED STATES BANKRUPTCY JUDGE

Before this Court is the Response in Opposition to Petition for Recognition of Indonesian PKPU Proceeding and Motion for Summary Judgment Denying Recognition , at ECF Number 50, which I'll refer to as the Motion, filed by 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, whom I will refer to as the Objecting Noteholders. The Motion seeks summary judgment in this Chapter 15 case to deny recognition of the Debtor's Indonesian Proceeding, or the PKPU Proceeding.

BACKGROUND

Debtor PT Bakrie Telecom Tbk, or BTEL, was in the business of providing a fixed digital radio cellular telecommunication national network and services. See Declaration of Petitioner Jastiro Abi ... (referred to herein as the Abi Declaration) at ECF No. 6 ¶ 2. However, it currently has very limited business activities and negligible revenue. It is in the process of trying to implement an Indonesian court-approved debt restructuring plan, or the PKPU Plan, that would allow it to avoid liquidation and conduct more significant business operations. See id.

BTEL's current financial woes stem from a default on certain senior notes issued pursuant to an indenture and supplemental indenture. See Foreign Representative's Response to Noteholders' Statement of Undisputed Material Facts ... (referred to herein as the Undisputed Facts) at ECF No. 65 ¶ 1. Bakrie Telecom Pte. Ltd. (referred to herein as the Issuer), a subsidiary of BTEL, issued $ 380 million in 11.5% guaranteed senior notes due 2015 on behalf of BTEL. See id. The Indenture is governed by New York law. See id. ¶ 2. The Indenture contains a forum selection clause providing that the Issuer, BTEL, and each of the Subsidiary Guarantors (as defined below) irrevocably and unconditionally [submit] to the non-exclusive jurisdiction of any New York State or United States Federal court sitting in the Borough of Manhattan, the City of New York over any suit, action or proceeding arising out of or relating to the Indenture, any Note, or any Guarantee (as discussed below). See Abi Declaration, Ex. A § 12.07(b). The Bank of New York Mellon is the Indenture Trustee under the Indenture. See Undisputed Facts ¶ 3. Jastiro Abi—the purported foreign representative who filed this case on behalf of the Debtor—was a Director of both BTEL and of the Issuer at the time of the Offering. See id. ¶ 4.

BTEL solicited potential investors in the offering of the Notes by, among other things, distributing offering memoranda and traveling to New York, where it distributed an investor presentation to underwriters and potential investors. See generally id. ¶¶ 6–9. The investor presentation indicated that BTEL would use the offering proceeds to refinance its existing debt and for capital expenditures. See id. ¶ 10. BTEL caused the Issuer to be created for the sole purpose of issuing the Notes and loaning the offering proceeds to BTEL, which the Issuer did pursuant to an Intercompany Loan Agreement and Supplemental Intercompany Loan Agreement. See id. ¶ 18. As security for repayment of the Notes, the Issuer granted the Indenture Trustee an assignment of all creditor rights under the Intercompany Loan Agreements and a power of attorney upon an event of default on the Notes. See id. ¶¶ 21–22; see generally id. ¶¶ 23–25.

Additionally, as primary obligations to secure repayment of the Notes, BTEL guaranteed the Notes pursuant to a Parent Guarantee. See id. ¶ 31. The Parent Guarantee provides noteholders and the Indenture Trustee direct recourse to BTEL without requiring them to pursue the Issuer for non-payment. See id. ¶ 33. Petitioner 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. ¶ 34. PT Bakrie Network and PT Bakrie Connectivity similarly guaranteed the Notes pursuant to a Subsidiary Guarantee. See id. ¶ 31. I will refer to them as the Subsidiary Guarantors. The Parent Guarantee and the Subsidiary Guarantee are governed by New York law. See id. ¶ 32.

BTEL, the Issuer, and the Subsidiary Guarantors ultimately defaulted on scheduled interest payments due on the Notes in November 2013 and May 2014. See id. ¶ 41. 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 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. ¶ 50. In response, the Objecting Noteholders—who are purchasers and beneficial holders of some $ 105 million in 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 to engage in discussions with BTEL about its financial and operational plans. See id. ¶¶ 36, 52. That summer, 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 id. ¶ 53; see generally id. ¶¶ 54–58. But by August 2014, discussions between BTEL and the Ad Hoc Committee had broken down. See id. ¶ 59.

Accordingly, in September, 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. ¶ 62. 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. See id. ¶ 63.

Meanwhile, on October 23, 2014, one of BTEL's other creditors filed a PKPU application against BTEL in the Central Jakarta Commercial Court (the "Commercial Court"). See id. ¶ 65. A PKPU proceeding is a court-enforced suspension of payments process in Indonesia that is designed to provide a debtor a definite period of time to restructure its debt and reorganize its affairs pursuant to a composition plan with its creditors. See Abi Declaration ¶ 12. BTEL engaged in months of restructuring negotiations with the noteholders, ultimately resulting in the Commercial Court granting a Temporary Suspension of Payment in the PKPU. See Undisputed Facts ¶¶ 68, 70. The Suspension of Payment named Titik Tejaningsih as Supervisory Judge and appointed William Eduard Daniel and Imran Nating as Administrators. See id. ¶ 71. The Administrators then set a 29-day schedule within which a restructuring plan was to be finalized, voted on, and confirmed. See id. ¶ 74.²

For BTEL's PKPU Plan to be accepted, the proposal was required to be approved by the requisite majority of creditors attending and voting at the meeting at which the Plan was considered, namely a majority in number and two-thirds in value of holders of each class of debt that attended and voted at the meeting. See Abi Declaration ¶ 16. Broadly, the Objecting Noteholders complain that, even though they filed claims, they were excluded from the PKPU process. See generally Undisputed Facts ¶¶ 75–113. They contend that they were prevented from meaningfully participating in the PKPU Proceeding because the Administrators used something called the "record and reports" to evaluate and determine who could vote on BTEL's PKPU Plan, and the Administrators denied the claims filed by the Ad Hoc Committee and Steering Committee because they were not recorded on the record and report. See generally id. ¶¶ 88–94. Rather, BTEL listed the Issuer as its creditor owing the $ 380 million on the record and report, and the Administrators allowed this claim under the Intercompany Loan Agreements. See generally id. ¶¶ 91–92. The Objecting Noteholders assert that the Indenture Trustee did not consent to the Issuer voting the Note debt instead of the noteholders (and told the Administrators as much), that the Issuer lacked standing to vote the Note debt and was not authorized to do so under the terms of the Indenture, and that the PKPU Plan would not have received the requisite votes needed for approval if the Issuer had abstained from voting. See generally id. ¶¶ 100–124. They also claim that the Administrators ignored multiple letters they sent concerning, among other things, information requests, how to submit their claim, and a request for extension of the PKPU Proceeding. See generally id. ¶¶ 80–87.

BTEL's PKPU Plan ultimately did receive the requisite creditor support and was approved in December 2014. See id. ¶ 119. Neither the Indenture Trustee nor any of the Objecting Noteholders appealed the Indonesian Court's decision, but the Minister of Communication and Informatics of the Republic of Indonesia did. See Abi Declaration ¶ 19–20. This appeal was denied by the Supreme Court of Indonesia (the "Indonesian Supreme Court"). See id. ¶ 21, Ex. C.

The same day that their claims were rejected in the PKPU Proceeding, the Objecting...