UPDATE 2: 5:02 a.m. ET 12/2/2021: Syndicated and bilateral lenders to PT Sri Rejeki Isman Tbk. met with Indonesia’s Financial Services Authority (OJK) on Dec. 1 to discuss the textile maker’s in-court restructuring, or PKPU, the day before judges at the Semarang Commercial Court agreed to extend the process at a meeting held today, Dec. 2, said two sources with knowledge of the situation.
The meeting took place at the invitation of the OJK to lenders, said both sources, with one of the sources describing the intervention as acting as a bridge between creditors and the company, as dialogue between the two sides had effectively closed.
News of the extension followed an acrimonious series of back and forth
announcements from the company and Clifford Chance and Kroll, the respective legal and financial advisors to an ad hoc group (AHG) of holders of Sritex $150 million 6.875% due 2024 notes and $225 million 7.25% due 2025 notes, with Sritex asserting that there was no plan for a PKPU extension, and that the alternative to a vote in favour of its proposed composition plan was a drawn-out liquidation under which noteholders would likely receive just eight cents on the dollar. Clifford Chance and Kroll asserted that it was in Sritex Group’s control to request an extension and that the AHG did not support the company’s proposed composition plan.
The Court-appointed administrator for Sritex’s PKPU proceeding, Martin Patrick Nagel, told Reorg that the PKPU extension was granted by the court today because there was a request from the creditors, which was approved by the debtor, following which the supervisory judge granted the PKPU extension.
OJK’s spokesperson said in response to Reorg’s request for comment that “OJK is not involved in corporate affairs because it is a business decision. OJK provides precautionary signs that it must be complied with in handling the issue of a debtor.”
Sritex, confirming Reorg’s earlier reporting,
announced today the extension of the PKPU proceeding, although it noted that the request for an extension at today’s creditors’ meeting came “despite the commencement of the Voting Process”, stating also that “voting of the PKPU Composition Plan on 2 December 2021 was to allow a swift resolution of the PKPU Proceeding that is in the best interests of the Sritex Group and all its creditors and stakeholders.”
Sritex added in its announcement that the company did not object to the consensus reached at the Dec. 2 meeting “in line with its commitment to act in the best interests of its creditors and with a view to ensuring that the voice of the creditors continues to be heard and considered”.
Based on a presentation by AJCapital, the company’s financial advisor, Sritex’s PKPU may be extended to the maximum 270 days allowed under Indonesian law to February 2022, to align with the Singapore court’s process,
as reported.
Back and Forth
In the period running up to voting on the proposed composition plan, Kroll as financial advisors to an ad hoc group (AHG) of noteholders had sent a letter to Sritex, requesting, among other items, a capital injection from the Lukminto family into Sritex of at least $185 million for working capital purposes,
as reported.
That followed an earlier presentation from Deloitte which stated that around $150 million in new money - in the form of an equity injection or sponsor-collateralised working capital facility - is essential to the company’s business model and the new money can accelerate Sritex’s turnaround and improve its debt sustainability by significantly shortening the payback period on Sritex’s debts,
as also reported.
Sritex had as early as Nov. 18 insisted that if creditors failed to approve its PKPU composition plan, that the company would enter liquidation and existing holders of its notes would likely receive eight cents on the dollar,
as reported.
Following publication of a revised PKPU composition plan on Nov. 24, Clifford Chance and Kroll announced that the AHG did not support Sritex’s
revised composition plan and instead supported an extension of the PKPU process until Jan. 31, 2022,
as reported.
That led Sritex to announce on Nov. 25 that no extension was being sought and the voting deadline for the PKPU composition plan for noteholders remained Nov. 30, 2021,
as reported. The company added that “it has come to the attention of the Sritex Group that a purported ad hoc group of the holders of the Notes has suggested that there is a possibility in which the PKPU Proceeding may be further extended as an alternative to voting on the PKPU Composition Plan.
These rumours are false.” (emphasis retained)
Clifford Chance and Kroll responded on Nov. 26 with a
press release stating the AHG’s position remains to vote against the PKPU composition plan, and notes “practical challenges” faced by noteholders in submitting votes through the clearing systems,
as reported.
Sritex responded again on Nov. 29, reiterating that if it failed to get requisite approval from creditors regarding the company’s PKPU composition plan it would enter into a “uncertain, time-consuming and value-destructive” liquidation process in Indonesia. It also reiterated from
its earlier statement that “such liquidation may invariably take some years before any payment (if any) is made to creditors”.
The same announcement stated that Sritex had reached out to Clifford Chance, which had been put on notice that the law firm’s release contained false and misleading statements and had been asked to retract the release. The announcement noted that it is unlawful and wrongful for any person to circulate false and misleading information that has the effect of creating confusion in the market,
as reported.
The court hearing to approve extension of the PKPU will be held Dec. 6, according to Sritex’s announcement to the Singapore Exchange today.
--Sarah Yuniarni
UPDATE 1: Sritex Confirms PKPU Extension at Creditors’ Request, Subject to Approval from Indonesian Court at Hearing Dec. 6 UPDATE 1: 5:00 a.m. ET 12/2/2021: PT Sri Rejeki Isman Tbk (Sritex) in an
announcement to the Singapore Exchange today, Dec. 2, confirmed Reorg’s earlier reporting that its PKPU proceeding would be extended again, and stated that this was at the request of certain creditors at a creditors’ meeting in the Indonesian court on the same day.
The extension is subject to the approval of the Indonesian court at a hearing set for Dec. 6, the announcement states.
The extension was in line with Sritex “commitment to act in the best interests of its creditors, and with the view to ensuring that the voice of the creditors continues to be heard and considered”, and accordingly, the voting deadline on the voting process is set to be extended and amended in line with any extension of the PKPU proceeding, the announcement states.
Original Story 1:04 a.m. UTC on Dec. 2, 2021BREAKING: Judges at Semarang Commercial Court Extend Sritex PKPU Proceedings; Semarang Court to Determine PKPU Extension Date at Virtual Meeting With Creditors Dec. 6At a meeting held today, Dec. 2, in Semarang, Central Java, between the court administrators, and PT Sri Rejeki Isman Tbk’s (Sritex) creditors, the judges at the Semarang Commercial Court granted the vertically integrated textile company an extension of its in-court supervised restructuring (PKPU), according to a source familiar with the matter and the Court-appointed administrator for Sritex’s PKPU proceeding, Martin Patrick Nagel.
Nagel and the source familiar with the matter said the extension date will be decided by the judges at a virtual meeting with its creditors on Dec. 6.
This is the third time judges at the Semarang Commercial Court have extended Sritex’s PKPU. The court had on Sept. 20 granted Sritex a 77-day PKPU extension after earlier on June 21
granting a 90-day extension,
as reported.
More follows…