Creditor worries decision from court of Serang- PT Tripolyta Indonesia Tbk

"You are the party provide the undertaking and also the party whom deny such statement.” Such statement is accurate for the matter of PT Tri Polyta Indonesia Tbk versus 95 foreign creditors (bondholders) in District Court of Serang, Banten.

The case above, at the moment has entered the stage of exhibit verification and pursuant to the source of Bisnis, such matter is going to be adjudged on next month (May 2004).

Without acknowledged the content of such judgment, obviously, the foreign investors’ sights are focused to the District Court of Banten.

Eight years ago, PT Tri Polyta Indonesia Tbk has made loan agreement and indenture agreement along with its ancillary agreement to obtain loan in amount of US$185 million of 95 creditors (bondholders).

Further after accept the loan; PT Tri Polyta Indonesia Tbk. Should has been fulfilled the requirement to pay the installment to the creditor.

However, the condition occur is otherwise, the public company has breached on such agreement under reason that such agreement is not valid and in contradiction with the prevailing laws in Indonesia.

PT Tri Polyta Indonesia Tbk further file a claim trough District Court of Serang to all creditors to pay immaterial indemnity (collectively) in amount of US$500 million, added by immaterial losses in amount of US$100 million and amount of money that has been paid to PT Tri Polyta to bond holders in amount of US$43 million.

Such case has been viewed by foreign investors. They are worried in waiting the judgment of Panel of Judges in such matter.

Significant Creditors.

The case is become interesting, not only due to the creditors are significant creditors, but also amount of defendant in such matters includes 96 parties.

Such case was commenced at the time of PT Tri.Polyta Indonesia Tbk find a loan to abroad for the business operation in Indonesia. To obtain such loan, the public company entered into a loan agreement and indenture agreement along with the ancillary agreements.

PT Tri Polyta Indonesia Tbk has made the loan agreement with PT Tri Polyta Finance B.V – subsidiaries and 100% shares are possessed by PT Tri Polyta Indonesia Tbk on November 25, 1996 for the loan in amount of US$185 million. PT Tri Polyta Finance BV is the company that subject to the law of Netherlands.

On the same time, (November 25, 1996) has also made an indenture agreement that mention, in principal, PT Tri Polyta Finance BV as the bond issuer (issuer or debtor), while PT Tri Polyta Indonesia Tbk as the guarantor and Bank of New York as the trustee.

In the Indenture agreement, stipulates that Bank of New York has appointed The Chase Manhattan Bank as the underwriter and search for bond buyers, therefore it shall obtain 95 creditors to purchase on such securities.

To this moment there are no problem occur, and PT Tri Polyta Indonesia Tbk is succeed is obtain fund in amount of US$185 with interest rate of 11 3/8% from result of issuance of such bonds.

On the beginning, payment conducted by PT Tri Polyta Indonesia Tbk almost without problem. Even though, such public company is remaining to pay the installment over indebtedness, once within six months pursuant to the agreement.

The problems occur after Indonesia is under economic crisis, and the exchange rate of rupiah over US Dollar at that moment is raised into IDR 15.000 per US$1.

PT Tri Polyta Indonesia Tbk is remain paying the obligation on December 1, 1998. Total obligation that has been installed to the bondholder is in amount of US$43 million.

Entering the year of 1999, payment of PT Tri Polyta Indonesia was starting to decreased and terminate. Result of obligation of payment, Bank of New York as the trustee has reminded PT Tri Polyta Indonesia Tbk to pay the obligation to the bond holders.

The warning was disregarded, therefore Bank of New York on October 23, 2002 has taken legal action by means of submit the claim trough district court of New York in the judgment April 25, 2003 has determined Bank of New York had won the claim versus PT Tri Polyta Indonesia Tbk Indonesian Company must pay all principal debt in amount of US$185 million, added with interest and other costs. Total obligation to all bondholders is in amount of US$310 million.

Two months prior to the judgment of Court of New York was declared, PT Tri Polyta Indonesia Tbk trough the lawyer Hotman Paris Hutapea has submit the claim to all the creditor trough District Court of Serang with the reason of legal smuggling, therefore loan agreement, indenture agreement that have been executed on November 25, 1995 are with legal defect.

In the documents of claim as obtained by Bisnis, PT Tri Polyta has claim its creditors to pay material lindemnity and immaterial in amount of US$643 million plus interest 6%.

In the other hand, PT Tri Polyta also has request to the court to put a security attachment over the assets that has been encumbered as security by PT Tri Polyta Tbk to obtain loan in amount of US$185 million.

Legal Evasion.

Pursuant to Hotman, in the claim document that has been found legal evasion in the loan agreement, indenture agreement and other supporting documents.

The Legal evasion, pursuant to his opinion, PT Tri Polyta Finance BV stipulates as the creditor in the loan agreement November 25, 1996, but in the indenture agreement, Tri Polyta Finance BV acted as the creditor.

In fact, there is one transaction and one type of debt of PT Tri Polyta Indonesia Tbk to PT Tri Polyta Finance BV.

Besides, pursuant to his opinion, PT Tri Polyta Indonesia Tbk in the loan agreement is stipulates as the debtor, but in the indenture agreement, the company acted as the guarantor.

In fact, there is one debt transaction, between PT Tri Polyta Indonesia Tbk with PT Tri Polyta Finance BV. Here is form of legal evasion as mentioned by the advocate.

Therefore, for one loan transaction was being fabricated, for PT Tri Polyta Indonesia Tbk has two qualifications in one, as a debtor and as a guarantor for the same debt. Hotman also focused on the trustee matters. “Law of Indonesia is not acknowledged the termination of trustee (termination in common law). Stipulation of the word “trustee” in the security documents is not in line with prevailing law in Indonesia.”

T Mulya Lubis, Attorney in Fact of Merrill Lynch & Co, Inc, Lehman Brothers, Credit Suisse First Boston don AMHK Limited (in liquidation) previously known as Merrill Lynch Asset management (Hong Kong), has stated the claim of PT Tri Polyta Indonesia Tbk is only an action to avoid the responsibility to pay loan in amount of US$185 million.

Fabricated

PT Tri Polyta Indonesia Tbk, pursuant to Mulya, has conducted fabricated action by turning out the facts, in order to make Panel of Judges be affected.

Pursuant to Mulya, accusation of the plaintiff over the loan agreement and indenture agreement has violate the prevailing laws in Indonesia are not the right evaluation.

"loan agreement and indenture agreement are totally different at all, both agreement are made under good faith.” He said.

In the Indenture Agreement, he said, PT Tri Polyta Indonesia Finance BV acted as the bond issuer and not as the creditor, while Bank of New York acted as the Trustee.

In the opinion of the practitioner, is not logic if the plaintiff has just file an objection and stated the loan agreement and indenture agreement is not in accordance with the law after PT Tri Polyta Indonesia Tbk take benefit from the loan in amount of US$185 million.

Indenture Agreement, he added, was made pursuant to the law of New York and the agreement has fulfilled the requirement of validity of an agreement as stipulated on Article 1320 Indonesian Civil Code. If the Indonesian law did not familiar with terminology of trustee, as argued by the Plaintiff, Mulya has affirmed that it was not true.

In Indonesian Law, concept of Trustee is acknowledged as stipulated in the Law Nr.8/1995 regarding Capital Market.

While, Rahmat Bastian, Attorney In Fact of Oaktree Capital management, LLC and Cerberus Capital management, LP, in such case has stated that arguments that has been stated by the Plaintiff is incorrect.
"Plaintiff also illustrates the existence of bad faith and intention to release their obligation pursuant to the agreement,” He said.

In his opinion, all agreement that has been made by the parties is valid and binding to both parties involved in such agreement.

Bastian affirmed that he had deliver letter to Supreme Court to request assistance on supervision towards the hearing at PN Serang, since there is an existence of mistakes in the procedure of adjudge over the case, He stated there is an indication unfair and illogic hearing procedure. First, manipulation on the venue of such hearing, Plaintiff had determined place to submit the claim at the Land Office of Serang, Land National Agency as the Plaintiff located in Serang.

Second, manipulation over the concept of unlawful act performed by PT Tri Polyta Indonesia Tbk has accused 97 defendants have been performed unlawful act that violate Indonesian law during the preparation of an agreement. While, he said, Plaintiff is the parties whom executed all related agreements.

Third, the time of execution of the security attachment is suspicious. The declaration of the judgment by District Court of Serang was performed without provide the security by the Plaintiff which has the same value as value of the goods that was confiscated. This matter was a violation towards Indonesian Civil Procedural Laws.

All parties have delivered their arguments and legal facts. At present it depends on the Panel of Judges in produce on the decision, whether the judgment is going to fulfill the claim of PT TRl Polyta Indonesia Tbk. Or otherwise annul over such claim.