PT Bakrie Telecom Tbk
Case Information
UNITED STATES BANKRUPTCY COURT FOR PUBLICATION SOUTHERN DISTRICT OF NEW YORK -----------------------------------------------------------x
In re: Chapter 15 PT BAKRIE TELECOM TBK, Case No. 18-10200 (SHL)
Debtor in a Foreign Proceeding.
-----------------------------------------------------------x
POST-TRIAL MEMORANDUM OF DECISION
A P P E A R A N C E S :
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 )
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
,
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. ¶ 3. The Indenture authorizes the Indenture Trustee to submit proofs of claim on behalf of the noteholders in a restructuring proceeding. 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. ¶ 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.” ¶ 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. 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 Foreign Representative on ways to “dilute” or “cram down” the Ad Hoc Committee. ¶ 46. In November 2014, the Commercial Court granted BTEL a Temporary Suspension of Payment (“SOP”). See Stipulation ¶ 47. Titik Tejaningsih was named as Supervisory Judge and William Eduard Daniel and Imran Nating were appointed as Administrators to oversee the PKPU Proceeding. Id. ¶ 48. The Commercial Court then set a 29- day schedule within which the PKPU Plan was to be finalized, voted on, and confirmed; it also scheduled a first creditors’ meeting and creditor verification meeting. See Stipulation ¶ 50. Upon implementation of the SOP, BTEL was prohibited by law during the period before plan approval from taking any action that affected assets or management without the approval of the Administrators. Id. ¶ 49.
During this 29-day schedule, the Objecting Noteholders instructed the Indenture Trustee to file proofs of claim on their behalf, and the Indenture Trustee did so in late November 2014. See id. ¶ 51. In support of the claim, the Indenture Trustee submitted the Indenture, Intercompany Loan Agreement, and Parent Guarantee of BTEL to the Administrators, explaining in a letter that the amount due under the Notes and Indenture were guaranteed by BTEL as primary obligor and that the Issuer had assigned its rights against BTEL under the Intercompany Loan Agreements to the Indenture Trustee. Stipulation ¶¶ 52–54. The Issuer also filed a proof of claim for the entire amount due under the Notes, attaching the Intercompany Loan Agreements to its filing. Id. ¶¶ 64–65; see also Foreign Representative’s Proposed Findings of Fact & Conclusions of Law (“Foreign Representative’s FFCL”) ¶ 71 [ECF No. 108]; Objecting Noteholders’ Proposed Findings of Fact and Conclusions of Law (the “Objecting Noteholders’ FFCL”) at 21 ¶¶ 124, 126 [ECF No. 109].
In late November 2014, counsel for the Ad Hoc Committee sent a letter to the Administrators asserting that BTEL’s draft plan lacked sufficient information for the creditors to make an “informed vote” on the proposed PKPU Plan. ¶¶ 55–56. In December 2014, the Ad Hoc Committee again sent letters to the Administrators stating that their requests for documents and information had been ignored and requesting that the PKPU Proceeding’s schedule be extended, but this request was not granted. See id. ¶¶ 57–60.
Under Article 271 of the PKPU Law, [5] BTEL submitted its “records and reports” (the “Record and Report”) to the Administrators. Id. ¶ 62. Under PKPU Law, the Record and Report is a list compiled by an Indonesian debtor of, inter alia , its creditors and the amounts owed by the debtor that is to be compared to the Administrators’ list of creditors. Trial Tr. 181:25– 182:20, Nov. 21, 2019 (Wijaya) [ECF No. 104]; Sidharta Testimony ¶¶ 84–87; Wijaya Testimony ¶¶ 24, 60. A creditor verification meeting is then held at which the Administrators prepare a list of the claims, including “whether the claims are recognized or denied.” Foreign Representative’s FFCL ¶ 46 (quoting Wijaya Testimony ¶ 25); Objecting Noteholders’ FFCL at 25 ¶ 153. The claims are subsequently reviewed by the Supervisory Judge who determines which creditors are eligible to vote. Foreign Representative’s FFCL ¶ 47 (citing Wijaya Testimony ¶ 26). BTEL did not list the $380 million of Notes or the Indenture Trustee as a creditor on the Record and Report it submitted to the Administrators at the creditor verification meeting held in early December 2014. Stipulation ¶ 63. Instead, BTEL listed the Issuer as the creditor for the $380 million of Notes. Id. ¶ 64. At the creditor verification meeting, the Administrators allowed the claim submitted by the Issuer under the Intercompany Loan Agreements and denied the claim filed by the Indenture Trustee. ¶¶ 65–66.
After the creditor verification meeting, the Indenture Trustee informed the Issuer, BTEL, and the Subsidiary Guarantors by letter that the Intercompany Loan Agreements provided the Indenture Trustee with the sole right to make a claim against BTEL and that it did not consent to the Issuer submitting a claim for the indebtedness evidenced by the Notes. Id. ¶ 67. Such consent, the Indenture Trustee argued in a letter to the Administrators, was necessary for the Issuer to submit its claim and vote at the creditors’ meeting on the proposed PKPU plan because the Issuer had assigned all of its rights, interest, and benefits to the Indenture Trustee. See id. ¶¶ 67–71. The Indenture Trustee also argued that the Issuer agreed under the Assignment that it would not, without the Indenture Trustee’s consent, “make or agree to any material amendment, modification or variation of the Intercompany Loan Agreement or release [BTEL] from any of its obligations under the Intercompany Loan Agreement.” Id. ¶ 70. Further, the Indenture Trustee argued, the Issuer had appointed the Indenture Trustee as its “attorney” in the event of default to enforce the rights under the Intercompany Loan Agreement. Id. ¶ 71. In the letter, the Indenture Trustee concluded that the Issuer had no standing to submit the Issuer claim and no standing to vote on the proposed PKPU plan without the consent or direction of the Indenture Trustee. Id. By email, BTEL’s counsel requested the Indenture Trustee’s consent to vote in favor of the proposed PKPU Plan, but the Indenture Trustee refused. See id. ¶¶ 74–75. BTEL’s counsel also informed the Indenture Trustee that BTEL would seek a ratification of the action and waiver of default if the Indenture Trustee withheld consent and the proposed PKPU plan passed. See id. ¶ 74.
The Ad Hoc Committee subsequently submitted a letter to the Supervisory Judge asserting that the Issuer had improperly filed a claim without the consent of the Indenture Trustee. See id. ¶ 77. On December 8, 2014, the creditors with claims approved by the Administrators appeared before the Supervisory Judge for discussion and to vote on the proposed PKPU plan. ¶ 78. The Supervisory Judge then verified the Administrators’ decision and permitted the Issuer to vote the entire $380 million claim under the Intercompany Loan Agreements. See id. ¶ 79. Ultimately, the PKPU Plan was approved by the required majority of creditors according to PKPU Law Article 281 and memorialized in the Commercial Court’s decision (the “Commercial Court Judgement”) issued the following day. See id. ¶ 80. The Issuer was one of 325 creditors that voted in favor of the PKPU Plan, but its claim represented approximately 56% of the total amount of unsecured indebtedness restructured by the plan. See id. ¶¶ 81–82. The other 324 unsecured creditors that voted to approve the PKPU Plan represented only 38.6% of the total unsecured claim amount. Id. ¶ 83. The remaining unsecured creditors either voted against the plan or abstained. Id. ¶ 84. After the vote was taken, the Ad Hoc Committee sent notice to the Issuer that the Issuer’s vote was an ultra vires act taken without the Indenture Trustee’s consent. Id. ¶ 90.
The PKPU Plan eliminated millions of dollars in past due interest and provided that 30% of the debt on the Notes was to be paid in cash over an extended period of time and 70% was to be converted to Mandatory Convertible Bonds with a term of ten years at Indonesian rupiah (“Rp” or “IDR”) 200 per share. Id. ¶¶ 85–86. But the 30% cash portion could only be paid after first satisfying a “waterfall” of certain other obligations. Id. ¶ 87. If BTEL has insufficient funds to satisfy the waterfall—and it has not had sufficient funds to date—the 30% cash portion can be deferred for more than 10 years and converted to Mandatory Convertible Bonds. See id. ¶¶ 88– 89.
Later in 2014, the PKPU Proceeding officially concluded under the requirements of PKPU Law Article 288. ¶ 91. Neither the Indenture Trustee nor any of the Objecting Noteholders appealed the Commercial Court Judgment, but the Minister of Communication and Informatics of the Republic of Indonesia did. See Abi Testimony ¶ 34; Stipulation ¶¶ 92, 94. This appeal was denied by the Indonesian Supreme Court in October 2015 (the “Indonesian Supreme Court Judgment”), affirming the Commercial Court Judgment. See Stipulation ¶ 93.
About the same time that the Commercial Court granted the Issuer the right to vote as the creditor on the Notes, the Objecting Noteholders commenced a second action in the New York state court for fraud and other tortious conduct in connection with the Notes Offering and for a declaratory judgement that the PKPU Proceeding was invalid with respect to the Notes and Indenture. See id. ¶¶ 80, 96. These claims were subsequently consolidated with the already pending case alleging breach of Notes and other claims. See id . ¶ 97.
The New York court granted summary judgment on the Objecting Noteholders’ breach of contract claim and sustained the claims against the Issuer and Subsidiary Guarantors for fraud in connection with the Offering but dismissed the claims against the individual defendants and PT Bakrie and Brothers (“B&B”) for lack of personal jurisdiction. See id. ¶¶ 98–99. On cross- appeals, the New York Appellate Division affirmed the summary judgment granted in favor of the Objecting Noteholders as to liability on the Notes, Indenture, and Guarantees, and sustained the fraud claims. See id. ¶ 101. The Appellate Division also reinstated the claims against the individual defendants and B&B, and ordered jurisdictional discovery. See id. ¶¶ 100, 102. In December 2017, the New York trial court ordered the parties to proceed with jurisdictional discovery. See id. ¶ 102.
Less than two weeks later, BTEL executed a “Declaration of Appointment of Foreign Representative and Authorization to File Chapter 15 Petition” that appointed Mr. Abi to serve as BTEL’s foreign representative and authorized him to file a petition under Chapter 15 of the Bankruptcy Code. See id. ¶ 103; Abi Testimony ¶ 6. Mr. Abi filed this Chapter 15 case in late January 2018. See Stipulation ¶ 104. Shortly after the filing, BTEL, the Issuer, and the Subsidiary Guarantors stipulated to entry of judgment on the Objecting Noteholders’ breach of contract claim in the New York litigation in the amount of $161,614,872.09. See id. ¶ 107. The money judgment was so ordered and entered in the Office of the Clerk, but the Objecting Noteholders have stipulated not to execute or enforce the money judgment pending resolution of this Chapter 15 case. See id. ¶¶ 108–09.
The Objecting Noteholders filed a motion for summary judgment in this case seeking to deny recognition of the PKPU Proceeding, but this Court denied the Objecting Noteholders’ motion given unresolved issues of fact. See generally In re PT Bakrie Telecom Tbk , 601 B.R. 707 (Bankr. S.D.N.Y. 2019). At the trial that followed, Jastiro Abi and Gregorius Petrus Aji Wijaya testified by written declaration for the Foreign Representative and Kevin Omar Sidharta and Defrizal Djamaris testified by written declaration for the Objecting Noteholders. See Abi Testimony; Wijaya Testimony; Sidharta Testimony; Djamaris Testimony. Each witness appeared live for cross-examination and any rebuttal testimony. Trial Tr. 32:6–147:16, Nov. 21, 2019 (Abi), 154:20–236:6, Nov. 21, 2019 (Wijaya) [ECF No. 104]; Trial Tr. 24:17–44:24, Nov. 22, 2019 (Djamaris), 45:21–50:15, Nov. 22, 2019 (Sidharta) [ECF No. 105].
DISCUSSION
I. Recognition of a Foreign Main Proceeding
A. The Legal Standard
A Chapter 15 case is commenced through the filing a petition for recognition of a foreign
proceeding by a foreign representative of a debtor.
See
11 U.S.C. §§ 1504, 1515(a). The
petition must be accompanied by certain evidentiary documents that are presumed authentic in
the absence of contrary evidence.
See
11 U.S.C. §§ 1515(b), 1516(b);
In re Bear Stearns High-
Grade Structured Credit Strategies Master Fund, Ltd. (In re Provisional Liquidation)
, 374 B.R.
122, 127 (Bankr. S.D.N.Y. 2007),
aff’d
,
Section 1517 of the Bankruptcy Code identifies the requirements for recognition of a foreign proceeding. It provides that
an order recognizing a foreign proceeding shall be entered if— (1) such foreign proceeding . . . is a foreign main proceeding or foreign nonmain proceeding within the meaning of [S]ection 1502;
(2) the foreign representative applying for recognition is a person or body; and (3) the petition meets the requirements of [S]ection 1515.
11 U.S.C. § 1517(a);
In re Inversora Eléctrica de Buenos Aires S.A.
,
Section 1506 of the Bankruptcy Code sets forth an overriding public policy exception,
providing that a court may refuse to take an action under Chapter 15 if such action “would be
manifestly contrary to the public policy of the United States.” 11 U.S.C. § 1506. But this
exception is read narrowly, with legislative history observing that “the word ‘manifestly’ in
international usage restricts the public policy exception to
the most fundamental policies of the
United States
.”
Morning Mist Holdings Ltd. v. Krys (In re Fairfield Sentry Ltd.)
,
B. The Objecting Noteholders Arguments as to Recognition The Objecting Noteholders raise several arguments in opposition to recognition. a. Foreign Representative
The first question before the Court is whether Mr. Abi has been properly appointed as the Foreign Representative of the Debtor. Under Section 101(24) of the Bankruptcy Code, a “foreign representative” is “a person or body, including a person or body appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor’s assets or affairs or to act as a representative of such foreign proceeding.” 11 U.S.C. § 101(24). To commence a case under Chapter 15 of the Bankruptcy Code, the foreign representative files a petition “for recognition of a foreign proceeding in which the foreign representative has been appointed.” 11 U.S.C. § 1515(a).
The Objecting Noteholders contend that Mr. Abi has not satisfied the requirements of a
foreign representative because he was not appointed until three years after the PKPU Proceeding
was formally closed. They argue, therefore, that his appointment does not meet the statutory
requirements of Chapter 15 because “it did not occur ‘during, or in the course of’ or ‘in the
context of’ a foreign main proceeding” under Sections 101(24), 1515, and 1517(a)(2) of the
Bankruptcy Code.
See
Objecting Noteholders’ FFCL at 48 ¶ 22 (citing
Vitro II
, 701 F.3d at
1047;
In re OAS
,
But as the Court has previously observed, “the Court is unaware of any authority
explicitly precluding the appointment of a foreign representative for purposes of pursuing
Chapter 15 relief after the foreign proceeding has been closed.”
In re PT Bakrie Telecom
, 601
B.R. at 718 (internal reference omitted). “[G]iven the policy underlying Chapter 15, it would be
hard to imagine why such action would be categorically prohibited.” Indeed, bankruptcy
courts have rejected similar arguments, concluding that the foreign main proceeding continued to
qualify as a foreign proceeding despite being “closed” under Section 101(23) of the Bankruptcy
Code when the foreign court was still “overseeing matters,” similar to the concept of retained
jurisdiction under a Chapter 11 plan.
See In re Zhejiang Topoint Photovoltaic Co., Ltd.
, 600
B.R. 312, 319–20 (Bankr. D.N.J. 2019);
cf. In re Oversight and Control Commn. of Avanzit, S.A.
,
This Court’s prior summary judgment decision left open whether further factual development might present a more problematic reason for the delay in appointing Mr. Abi. [7] But it did not. Rather, it demonstrated that the timing for filing this Chapter 15 case was based on practical considerations. The Debtor had hoped that it could prevail in the New York state court litigation with the Objecting Noteholders and thus avoid the need for a Chapter 15 proceeding. Abi Testimony ¶¶ 49–51; Foreign Representative’s FFCL ¶¶ 189–90. Once that was no longer possible, the Chapter 15 case became necessary. Notably, the Objecting Noteholders have not posited an alternative rationale for the delay. See In re PT Bakrie Telecom , 601 B.R. at 718. [8]
For all these reasons, therefore, the Court concludes that Mr. Abi is the duly appointed “foreign representative” of the Debtor within the meaning of section 101(24) of the Bankruptcy Code.
B. “Collective” Proceeding Requirement and Public Policy The Objecting Noteholders next argue that recognition should not be granted because the Indonesian PKPU Proceeding does not satisfy the requirements of being a collective foreign proceeding.
Section 101(23) of the Bankruptcy Code requires that a foreign proceeding be collective
in nature. Collective proceedings are those that consider “‘the rights and obligations of
all
creditors’—that is for the general benefit of creditors.”
Armada (Singapore) Pte Ltd. v. Shah (In
re Ashapura Minechem Ltd.)
,
When determining whether a proceeding was collective in nature, a court should examine
“both the law governing the foreign action and the parameters of the particular proceeding as
defined in, for example, orders of a foreign tribunal overseeing the action.” at 136 & n.37,
141 & n.85 (quoting
In re British Am. Ins. Co.
,
Against the backdrop of this standard, the Objecting Noteholders argue that the PKPU Proceeding was not “collective in nature” given who was allowed—and who was not allowed— to vote on the PKPU Plan based on the Notes. The Objecting Noteholders complain that their right to vote on the PKPU Plan was eliminated due to the exclusion of their rights under the Notes from BTEL’s Record and Report. See Objecting Noteholders’ FFCL at 46 ¶¶ 14–17 (applying first prong of Ashapura test). According to the Objecting Noteholders, this allowed the Debtor to “pre-determine” who qualified as a “creditor” because the Administrators relied on the Record and Report to determine who was a creditor in the PKPU Proceeding. Id. at 24 ¶ 148; 29 ¶¶ 176–77; 34–35 ¶¶ 203–11. Thus, the Objecting Noteholders argue that BTEL controlled the parameters of the PKPU Proceeding by excluding the obligations of the Objecting Noteholders in favor of the Intercompany Loans of Debtor’s wholly owned subsidiary and Issuer of the Notes, BTEL-Singapore. See Objecting Noteholders’ FFCL at 29 ¶¶ 176–77; 46–47 ¶ 18 (applying second prong of Ashapura test).
The Foreign Representative disagrees. It argues that the PKPU Plan has “all the earmarks of a collective proceeding” because it provided “equal treatment to all noteholders, including the Objecting Noteholders.” Foreign Representative’s FFCL ¶ 154. The Foreign Representative notes that the Objecting Noteholders “received notice and were extremely active participants in the PKPU Proceeding” and were able to make “multiple submissions and arguments to both the Administrators and the Supervisory Judge.” Id. ¶ 155. The Foreign Representative further asserts that the mere fact that the Objecting Noteholders’ arguments were rejected does not defeat the collective nature of the proceedings. Id. ¶ 158. And while the Administrators must verify the claims they receive against the Record and Report from the Debtors under PKPU Law Article 271, the Foreign Representative notes that the Administrators do not blindly adhere to the information provided by the Debtors. ¶¶ 168–69.
Given the entire record after trial, the Court concludes that the PKPU Proceeding is
“collective” because “the rights and obligations of
all
creditors” were considered by the foreign
court.
In re Ashapura
,
The Objecting Noteholders’ objection is not really about the collective nature of the
proceeding but rather who was allowed to vote a particular debt. But courts have found a
proceeding to be collective under circumstances similar to those here.
See
,
e.g.
,
In re ENNIA
Caribe Holding
,
There are other factors here that favor a finding that the PKPU Proceeding was a
collective one, including the notice provided to creditors, the appellate review of the trial court’s
decision, and the statutory priorities for the distribution of assets.
See In re Ashapura
, 480 B.R.
at 141;
In re ABC Learning Centres Ltd.
,
II. Request for Additional Relief, Including Enforcement of the PKPU Plan
Relying on Sections 1521 and 1507 of the Bankruptcy Code, the Foreign Representative also requests the additional relief of enforcing the PKPU Plan in the United States. Motion for Recognition and Enforcement of Indonesian PKPU Plan ¶¶ 43–44 [ECF No. 36]; see also Trial Tr. 6:16–24, 15:7–12, Nov. 21, 2019. As the Foreign Representative contends that the Commercial Court Judgment contains a discharge of the Debtor and all other parties under the Notes, the Foreign Representative essentially seeks a third-party non-debtor release of claims relating to the Notes. Motion for Recognition and Enforcement of Indonesian PKPU Plan ¶¶ 98– 103. Without such relief, the Foreign Representative contends, BTEL would be forced into liquidation to the detriment of its other creditors. Id. ¶ 102. In opposing this additional relief, the Objecting Noteholders argue that the third-party releases are not contained in the PKPU Plan and thus not properly before the Court. Objecting Noteholders’ Combined Response in Opposition to Petition for Recognition and Motion for Enforcement of Indonesian PKPU Plan ¶ 131 [ECF No. 87] (the “Objecting Noteholders’ Opposition”). They also argue that the PKPU Plan should not be enforced because they were not treated fairly in the PKPU Proceeding given the way voting was handled. ¶¶ 133–37, 140–41.
A. The Legal Standards for Additional Relief
Upon recognition of a foreign proceeding as the foreign main proceeding, Section 1520 of the Bankruptcy Code provides certain immediate relief. See 11 U.S.C. § 1520(a) (providing that the automatic stay will apply to all the debtor's property that is located within the territorial jurisdiction of the United States). But other additional relief is not automatic after recognition and instead may be requested under two different provisions: Sections 1521 and 1507. 11 U.S.C. §§ 1521 (“Relief that may be granted upon recognition”) and 1507 (“Additional assistance”).
The first of the two relevant provisions—Section 1521(a)—provides that “[u]pon
recognition of a foreign proceeding . . . where necessary to effectuate the purpose of this chapter
and to protect the assets of the debtor or the interests of the creditors, the court may, at the
request of the foreign representative, grant any appropriate relief . . . .” 11 U.S.C. § 1521(a).
Such “appropriate relief” includes a non-exhaustive list of certain types of relief that is
enumerated by the statute, including “any additional relief that may be available to a trustee,
except for relief available under [S]ections 522, 544, 545, 547, 548, 550, and 724(a)” of the
Bankruptcy Code. 11 U.S.C. § 1521(a)(7). Courts have found such “appropriate relief” under
Section 1521(a) to be the same type of relief that was previously available under Chapter 15’s
predecessor, Section 304 of the Bankruptcy Code.
Vitro II
,
The second provision for additional relief—Section 1507—provides that “if recognition is granted, [the court] may provide additional assistance to a foreign representative . . . .” 11 U.S.C. § 1507(a). Under this section,
the court shall consider whether such additional assistance, consistent with the principles of comity, will reasonably assure--(1) just treatment of all holders of claims against or interests in the debtor's property; (2) protection of claim holders in the United States against prejudice and inconvenience in the processing of claims in such foreign proceeding . . . .
11 U.S.C. § 1507(b)(1–2). The first factor in Section 1507(b) of “just treatment” is “generally
satisfied upon a showing that the applicable [foreign] law ‘provides . . . a comprehensive
procedure for the orderly and equitable distribution of [the debtor]’s assets among all of its
creditors.’”
In re Rede Energia S.A.
,
“The relationship between [Section] 1507 and [Section] 1521 is not entirely clear.”
In re
Toft,
In any event, relief under either Section 1507 or Section 1521 is within the discretion of
the Court and depends upon principles of comity.
Compare
11 U.S.C. § 1517 (if requirements
for recognition are met, relief “shall” be granted)
with
11 U.S.C. §§ 1521 and 1507 (both
providing that the court “may” provide additional relief after recognition);
see In re Tri-Contl.
Exch. Ltd.
,
“Comity refers to the spirit of cooperation in which a domestic tribunal approaches the
resolution of cases touching the laws and interests of other sovereign states.”
Societe Nationale
Industrielle Aerospatiale v. U.S. Dist. Court for S. Dist. of Iowa
,
“It is well established [in the Second Circuit] that we defer to foreign bankruptcy
proceedings on international comity grounds only if those proceedings “do not violate the laws
or public policy of the United States and . . . abide[ ] by ‘fundamental standards of procedural
fairness.’”
JP Morgan Chase Bank v. Altos Hornos de Mexico, S.A. de C.V.
,
In sum, federal courts assessing whether to extend comity look to (1) whether the foreign
proceeding abided by fundamental standards of procedural fairness; (2) whether the foreign
proceeding violated the laws or public policy of the United States; and (3) whether the foreign
judgment was affected by fraud.
See Hilton
,
With respect to the first inquiry of procedural fairness, courts have focused on eight factors as indicia of procedural fairness:
(1) whether creditors of the same class are treated equally in the distribution of assets; (2) whether the liquidators are considered fiduciaries and are held accountable to the court; (3) whether creditors have the right to submit claims which, if denied, can be submitted to a bankruptcy court for adjudication; (4) whether the liquidators are required to give notice to the debtors’ potential claimants; (5) whether there are provisions for creditors’ meetings; (6) whether a foreign country’s insolvency laws favor its own citizens; (7) whether all assets are marshalled before one body for centralized distribution; and (8) whether there are provisions for an automatic stay and for the lifting of such stays to facilitate the centralization of claims.
Allstate
,
With respect to the second inquiry about the public policy of the United States, a court “is
to guard against forcing American creditors to participate in foreign proceedings in which their
claims will be treated in some manner inimical to this country's policy of equality.”
Cunard
, 773
F.2d at 459 (quoting
Banque de Financement, S.A., v. First Nat’l Bank of Boston,
With respect to the third inquiry relating to potential fraud, “[a] court in the United States
will not recognize a foreign judgment obtained by fraud if the effect of the fraud was to deprive
the losing party of an adequate opportunity to present its case and there was no adequate
opportunity for correction of the fraud in the foreign proceeding, including a timely appeal.”
R ESTATEMENT (F OURTH ) OF F OREIGN R ELATIONS L AW § 484 cmt. d (Am. Law Inst. 2018);
see
also Ackermann v. Levine
,
Additionally, the Supreme Court in Hilton made clear that deference to a foreign court under principles of comity contemplates a clear and formal record:
the foreign judgment appears to have been rendered by a competent court, having jurisdiction of the cause and of the parties, and upon due allegations and proofs, and opportunity to defend against them, and its proceedings are according to the course of a civilized jurisprudence, and are stated in a clear and formal record[,] . . . unless some special ground is shown for impeaching the judgment, as by showing that it was affected by fraud or prejudice, or that, by the principles of international law, and by the comity of our own country, it should not be given full credit and effect.
Hilton
,
Notwithstanding the importance of comity in considering a request for relief post-
recognition, “Chapter 15 [also] does impose certain requirements and considerations that act as a
brake or limitation on comity.”
In re Fairfield Sentry Ltd.
,
B. Third-Party Releases
Before considering the third-party release at issue here, it is helpful to first review the
significance of third-party releases generally and how such releases are viewed under United
States bankruptcy law. Generally speaking, a third-party release contemplates releasing a non-
debtor party from certain obligations and rights based on that party’s “material contribution[s]”
to the bankruptcy case, so long as the releases are “important” and “necessary” “to accomplish a
particular feature of a restructuring.”
In re Aegean Marine Petroleum Network Inc.
, 599 B.R.
717, 727 (Bankr. S.D.N.Y. 2019) (citing
In re Metromedia Fiber Network
,
Some circuits, including the Second Circuit, permit third party releases under specific
limited circumstances.
See In re Metromedia Fiber Network
,
Other circuits, including the Fifth, Ninth, and Tenth Circuits, do not permit third-party
releases in bankruptcy cases.
See Bank of N.Y. Tr. Co. v. Official Unsecured Creditors’ Comm.
(
In re Pac. Lumber Co.
),
Courts in the Second Circuit have permitted a third-party release in Chapter 15 cases after
analyzing the circumstances for the grant of such relief in the foreign proceeding. For example,
the court in
Agrokor
found that
Vitro II
—in which the Fifth Circuit declined to grant comity
because the Mexican plan was only approved due to the counting of insider votes—did not
preclude recognition and the enforcement of a settlement agreement containing a third-party
release.
In re Agrokor d.d.
,
C. Section 1521
Turning back to the specific relief sought here, the parties disagree about whether a third- party release was even included in the PKPU Proceeding. Foreign Representative’s FFCL ¶¶ 280–90 (arguing the PKPU Plan binds the Objecting Noteholders because they receive consideration under the plan and that the requested injunctive relief against the Objecting Noteholders is necessary to implement the PKPU Plan) (citing Wijaya Testimony ¶ 67); see also Objecting Noteholders’ FFCL at 37 ¶¶ 225–27 (arguing their expert witness provided an “unrebutted opinion” that the PKPU Law generally does not provide for third-party releases unless explicitly set forth in the plan and, thus, that the PKPU Plan and Proceedings here did not provide for a third-party release) (citing Sidharta Testimony ¶ 97). In assessing this issue, the Court looks to the three provisions in the Commercial Court Judgment that are cited by the Foreign Representative as the supposed source of a third-party release as to the Notes. The Court will address each of these in turn.
The first provision states:
By the homologation of this Reconciliation Plan . . . the Company will no longer have obligation to fulfill all agreement or documents relating to the issue of the Senior Notes which expire, including but not limited to the fulfillment of all existing guarantees in the frame of issue of Senior Notes namely the Corporate Guarantee provided by the Company, guarantee provided by the Grantor, as well as other guarantee if any.
Judgment Ratification of Homologation (the “Commercial Court Judgment”), ONX-86 at 64 (cited in Foreign Representative’s FFCL ¶ 284). This first provision is set forth under Section 1.6(IV)(A) of the Commercial Court Judgment, a section that governs the manner of payment of debt owed under the Senior Notes. It appears to provide a release of the Debtor (i.e., the “Company”) as to its obligations arising under the Senior Notes (i.e., the Notes held by various parties including the Objecting Noteholders). This includes a release of the Debtor as to any guarantees provided by the “Grantor” under the Senior Notes. But the Indonesian Judgment does not appear to define “Grantor,” nor has the Foreign Representative provided any explanation of the term anywhere in his papers. The Foreign Representative also does not cite— much less explain—the sentence immediately following this provision, which seems to impact the scope of obligations under any guarantee of the Senior Notes. That sentence provides that, to the extent guarantee obligations are triggered, payments will be made by the Company in accordance with Clause 3.6(IV). [13] Taken as a whole, therefore, this first provision grants a discharge of BTEL’s obligations under the Notes, but it is not clear to what extent it provides a release to any other party as to the Notes.
The second provision relied upon by the Foreign Representative is also unclear. It provides:
In case of Senior Notes Holder outside the territory of Indonesia, they are obliged to issue the general confirmation as the full and final settlement of all claims they have relating to the existing Debt of Senior Notes Proceeds Fund based on other law wherever prevailed and undertakes to revoke each current legal process/remedy overseas. In case of Senior Notes holders not willing to release the bill based on any law, they are not entitled to receive the new securities.
Commercial Court Judgment, ONX-86 at 60–61 (also contained in Section 1.6(IV)(A) of the Commercial Court Judgment). Once again, the Foreign Representative does not explain how this language operates to provide a third-party release—rather than merely a release of the obligations of the Debtor—but instead simply quotes the language without elaboration. Foreign Representative’s FFCL ¶ 283. In addition, the Foreign Representative does not address the other text providing context for this provision, which raises questions about exactly what obligations still exist under the Senior Notes. [14]
The third provision provides the best support for the Foreign Representative’s position. It states:
Any terms and conditions of this Reconciliation Plan . . . cancel and supersede any agreement and covenant both in writing and orally existed already before the Commercial Court Judgment, ONX-86 at 64–65 (emphasis added).
[14] This second provision falls under subsection (9), which provides:
If required the Company will try to request for or take a required effort/action in order the Debt of Senior Notes Proceeds will be settled/paid in accordance with the provision of point IV including but not limited to the action and provisions as follows . . .
Commercial Court Judgment, ONX-86 at 58 (emphasis added). This language is further modified by the subsequent sentence which appears to provide an opt-out for “Senior Notes holder” to the extent it is permitted by law. at 59. The Foreign Representative does not discuss any of this language.
date of Homologation including but not limited to any written agreement and covenant relating to the . . . Senior Notes Proceeds Fund Debt . . . together with the undertaking, agreement and covenant provided by the Company both in writing and orally relating to the Subsidiaries debts, including the judgments of the judicative board or arbitration board in any jurisdiction and relating to the debts of the Company and its Subsidiaries existed before the Date of Homologation. Therefore, all agreements, covenants both in writing or orally including the judgments of the judicative and arbitration boards in any jurisdiction word per word have been superseded by the terms and conditions in this Reconciliation Agreement.
Commercial Court Judgment, ONX-86 at 150–51 (cited in Foreign Representative’s FFCL ¶ 285). This provision is set forth under Section 1.9 of the Commercial Court Judgment which provides “[o]ther provisions on restructuring.” This provision cancels any agreements and covenants (both written and oral) that existed prior to the date of “Homologation,” including “any written agreement and covenant relating to . . . Senior Notes Proceeds Fund Debt.” This third provision is noteworthy for its breadth in covering—and superseding—all the obligations as to the Notes.
But finding a source for the third-party release in the language of the foreign judgment
does not end the inquiry. The Court must next consider whether such a third-party release is
appropriate when viewed through the prism of comity. That is more problematic. As a practical
matter, enforcing a third-party release in this case would release the Issuer, the Subsidiary
Guarantors, and individual directors and commissioners of BTEL and the Issuer from any
liability in the ongoing New York litigation initiated by the Objecting Noteholders. Objecting Noteholders’ Opposition ¶ 6; Motion for Recognition and Enforcement of Indonesian
PKPU Plan ¶¶ 39, 98–100. In deciding whether to extend comity to enforce the PKPU Plan
containing this third-party release, the Court must consider whether the foreign proceeding
abided by fundamental standards of procedural fairness as demonstrated by a clear and formal
record. These considerations overlap with those of Sections 1521 and 1507, which assure the
just treatment and protection against prejudice of claim holders in the United States through
adequate procedural protections. 11 U.S.C. §§ 1521, 1522(a), 1507(b)(1–2);
In re Atlas
Shipping
,
Moreover, there is nothing in the record about the justification for any third-party release. The Commercial Court Judgment does not provide any explanation, nor is there any explanation anywhere else in the records of the PKPU Proceeding. It simply exists in the foreign judgment. The Foreign Representative does not even offer a justification in his pleadings, and instead is content to simply rely on the language of the Commercial Court Judgment itself. But relying on the Commercial Court Judgment is insufficient where it does not provide any justification for the release, either under Indonesian law or otherwise. The lack of such explanation is particularly noteworthy given the testimony of the Objecting Noteholders’ expert witness that a third-party release is not standard for Indonesian PKPU proceedings but instead must be justified under Indonesian law. Sidharta Testimony ¶ 97. This testimony was not rebutted by the Foreign Representative.
This record is problematic when viewed against the Supreme Court’s guidance in
Hilton
on the need for a “clear and formal record” in evaluating comity.
Hilton
,
the British court carefully and thoroughly considered their respective allegations and proofs, provided [the defendant in the foreign proceeding] with ample opportunity to defend itself, and recorded the court's final decision clearly within that opinion . . . . The opinion of the High Court runs to 74 pages, and details extensive evidence presented to the court, as well as the court's thorough analysis of that evidence.
Id. at 473.
The record here as to the third-party release also stands in stark contrast to perhaps the
most similar precedent available: the Chapter 15 case of
In re Metcalfe & Mansfield Alt. Invs.
,
The Court’s decision today is not a ruling on the permissible scope of third-party releases
under Indonesian law. Indeed, the releases in a foreign proceeding subject to Chapter 15 need
not be identical to those that a U.S. court would endorse in a Chapter 11 case.
See In re Metcalfe
& Mansfield Alt. Invs.
,
D. Voting in the PKPU Proceeding
Turning to the other main argument raised by the Objecting Noteholders, they complain that the Commercial Court permitted an insider of the Debtors—the Issuer—to vote the Notes, rather than the Indenture Trustee or Steering Committee. Objecting Noteholders’ FFCL at 27 ¶ 166; 29 ¶ 177; 52–54 ¶¶ 38, 40; 59 ¶ 61. The Objecting Noteholders argue that this was done at the direction of the Debtors, who listed the Issuer as the creditor for the notes in the Debtor’s Record and Report that was part of the PKPU Proceeding. See Objecting Noteholders’ FFCL at 29 ¶ 176; 46–47 ¶¶ 18–19; 54 ¶ 41. The Foreign Representative responds by arguing that the Indonesian court made its own determination on the voting issue—informed by the actions of the Administrators—rather than blindly defer to the Debtor’s Record and Report. See Foreign Representative’s FFCL ¶¶ 168, 245.
Unlike the third-party release, the record is clear that the Indonesian court made an affirmative decision to grant the right to vote to the Issuer, rather than the Noteholders or the Indenture Trustee. While the initial decision was made by the Administrators, the issue was eventually brought to the Indonesian court for a decision as to what party should be permitted to vote the Note. See Stipulation ¶¶ 65–71, 77–79. Also unlike the third-party release, the parties presented argument on the voting issue before the Indonesian courts. Indonesian Supreme Court Judgment, FRX-1 at 137-40, 143-46; Foreign Representative’s FFCL ¶ 155. In these ways, the record on the voting issue is more robust than the record as to the third-party release.
But the record is nonetheless not particularly fulsome on the voting issue. The only discussion by the Commercial Court about voting the Notes refers only to the Debtor’s Record and Report:
Administrator Team disclaimed those 13 invoices of the creditors because after being verified, the fact was found that such claims were not contained in the record and report of the Debtor whereas based on Article 271 of Law on Insolvency and Debt Payment Obligation Suspension (“Law on Insolvency”) all calculations already incorporated by Administrator Team must be verified to the record and report of the Debtor.
Commercial Court Judgment, ONX-86 at 20. Similarly, the Indonesian Supreme Court upheld the Commercial Court Judgment with the same rationale, stating that the “Administrator Team disclaimed [the Bank of New York Mellon’s claim] because after being verified, the fact was found that such claims were not contained in the record and report of the Debtor based on Article 271.” Indonesian Supreme Court Judgment, FRX-1 at 32. In explicitly relying on the Record and Report of the Debtor, it highlights the Objecting Noteholders’ concern that the Debtor was essentially allowed to decide who should vote the Notes, notwithstanding the substantive protections afforded Noteholders to recover directly against BTEL.
Despite placing such importance on the Record and Report, however, the Foreign Representative did not introduce a copy of it as evidence in this case, thus preventing the Court and the Objecting Noteholders from ever examining it. [17] Mr. Djamaris testified that the Objecting Noteholders spent several months trying to obtain the true Record and Report from the Debtor, but never received it. See Djamaris Testimony ¶¶ 84–100. That testimony was not rebutted by the Debtor, who never offered any explanation for the document’s absence from this case. [18] The Foreign Representatives instead presented nuanced and extensive argument about the Objecting Noteholders’ lack of standing to vote as beneficial noteholders. More specifically, the Foreign Representative argues that because the Objecting Noteholders did not become registered “holders” of the Notes until February 2015—two months after the Commercial Court approved BTEL’s PKPU Plan—the Objecting Noteholders lacked rights as “holders” under the Indenture under New York law and thus lacked standing to instruct the Indenture Trustee to vote in the PKPU Proceeding. See Foreign Representative’s FFCL ¶¶ 253–56. The Foreign Representative also argued why—among the various options available to vote the bond debt— the option chosen by the Indonesian court makes sense. ¶¶ 241–48. In different circumstances, these arguments might carry the day. The problem is that none of the Indonesian courts’ decisions—or the record of the proceeding—include these rationales.
Questions about the reason for choosing the Issuer—a wholly owned subsidiary of the
Debtor and thus an insider—to vote the Notes are important when viewed in the context of
American jurisprudence. While the Foreign Representative is correct that merely being an
insider does not bar that party from voting, American courts are nonetheless concerned about
transparency, fairness, and due process as to the exercise of control by insiders in insolvency
proceedings.
See Vitro II
,
E. Other Issues
Frascella Enters., Inc.
,
Given the Court’s conclusions above as to Section 1521, the Court also finds that the Foreign Representative is not entitled to the relief requested as “additional assistance” under Section 1507. More specifically, the Court is unable to determine based on this record whether the requested additional relief here would be “consistent with the principles of comity and satisf[y] the fairness considerations set forth in [S]ection 1507(b).” In re Rede Energia , 515 B.R. at 90.
There are two remaining issues raised by the Objecting Noteholders. They are worthy of brief comment in the event that further proceedings ever occur in this case.
First, the Objecting Noteholders contend that the PKPU Proceeding was influenced by
corruption, citing the Country Reports on Human Rights practices for 2017, issued by the U.S.
Department of State.
See In re PT Bakrie Telecom
,
Second, the Objecting Noteholders complain that the relief requested by BTEL violates
the public policy exception of Section 1506 of the Bankruptcy Code.
See
Objecting
Noteholders’ FFCL at 68–69 ¶¶ 97–98; 11 U.S.C. § 1506 (“Nothing in this chapter prevents the
court from refusing to take an action governed by this chapter if the action would be manifestly
contrary to the public policy of the United States.”). The exception is read narrowly, with
legislative history stating that “the word ‘manifestly’ in international usage restricts the public
policy exception to
the most fundamental policies of the United States
.”
In re Fairfield Sentry
Ltd.
,
CONCLUSION
For all the reasons set forth above, 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. The Foreign Representative shall settle an order pursuant to this Decision on five days’ notice. The proposed order must be submitted by filing a notice of the proposed order on the Case Management/Electronic Case Filing docket, with a copy of the proposed order attached as an exhibit to the notice. A copy of the notice and proposed order shall also be served upon opposing counsel.
Dated: New York, New York
April 15, 2021
/s/ Sean H. Lane UNITED STATES BANKRUPTCY JUDGE
Notes
[1] These “Objecting Noteholders” consist of 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 (collectively, the “Objecting Noteholders”).
[2] Unless otherwise specified, references to the Case Management/Electronic Case Filing (“ECF”) docket are to Case No.18-10200. There is an extensive evidentiary record in this proceeding. Trial testimony is cited as “Trial Tr. [page:line], [date] ( [witness] ).” Testimony provided by written declaration is cited as “[Witness] Testimony ¶ __.” Exhibits are cited as “FRX __” for the Foreign Representative's exhibits and “ONX __” for the Objecting Noteholders' exhibits.
[3] The Indenture contains a forum selection clause providing that the Issuer, BTEL, and each of the Subsidiary Guarantors “irrevocably and unconditionally submits 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 Decl., Ex. A § 12.07(b) [ECF No. 6-4].
[4] This is an Indonesian phrase meaning “suspension of payments.” Abi Testimony ¶ 25.
[5] The “PKPU Law” is a section of Indonesia’s Bankruptcy and Suspension of Debt Payment Obligations law that governs PKPU proceedings, including the filing and treatment of claims. See Foreign Representative’s FFCL ¶¶ 30–33, 42 (citing Wijaya Testimony ¶¶ 7–9, 21).
[6] Against the Objecting Noteholders’ objection, the Court has already held that the Debtor has “property” in
the United States that satisfies the requirements of Section 109 of the Bankruptcy Code.
PT Bakrie Telecom
,
[7] In the prior decision, the Court held that the “mere fact of the [Debtor’s] delay in seeking Chapter 15 relief after a foreign proceeding has been closed” did not preclude a finding that Mr. Abi was properly appointed as foreign representative, and that it would be “appropriate to examine the circumstances surrounding the timing of the foreign representative’s appointment and the significance, if any, of the delay.” In re PT Bakrie Telecom , 601 B.R. at 719.
[8] The Foreign Representative also cites prior cases where this Court has granted recognition to an Indonesian PKPU proceeding where the foreign representative was appointed after the plan was approved by the Commercial Court and control was returned to the debtors. Foreign Representative’s FFCL ¶ 185; see, e.g. , In re PT Bumi Resources Tbk , Case No. 17-10115 (MKV) [Decl. of Andrew Christopher Beckham, Ex. C and D, ECF No. 5] (showing the foreign representative was appointed after the plan was approved by the foreign court); In re PT Berlian Laju Tanker Tbk , Case No. 13-10901 (SMB) [Decl. of Cosimo Borrelli ¶ 23, 30, ECF No. 6] (showing the foreign representative was appointed after the plan was approved by the foreign court); In re PT Arpeni Pratama Ocean Line Tbk , Case No. 11-15691 (ALG) [Decl. of Fida Unidjaja ¶ 3, Exs, A & B, ECF No. 5] (showing the foreign representative was appointed after the plan was approved by the foreign court).
[9] The Court also notes that previous Indonesian PKPU proceedings have been recognized as foreign main proceedings under Chapter 15 by a variety of courts. See, e.g., In re PT Bumi Resources Tbk , Case No. 17-10115 (MKV) (Bankr. S.D.N.Y. March 17, 2017); In re PT Berlian Laju Tanker Tbk , Case No. 13-10901 (SMB) (Bankr. S.D.N.Y. Jan. 8, 2015); In re PT Arpeni Pratama Ocean Line Tbk , Case No. 11-15691 (ALG) (Bankr. S.D.N.Y. Jan. 12, 2012); see also In re PT Delta Merlin Dunia Textile, et al. , Case No. 19-13214 (SHL) (Bankr. S.D.N.Y. February 4, 2020) (granting recognition to Indonesian PKPU proceedings as foreign main proceedings).
[10] The Objecting Noteholders do not contest, and the Court finds, that BTEL also satisfied the remaining requirements under Section 1517(a) in that the foreign representative applying for recognition is a person or body, and the petition meets the requirements of Section 1515.
[11]
See also In re Atlas Shipping
,
[12] Other areas of American jurisprudence recognize the importance of an adequate record for effective
judicial review. One such example is the deferential review of agency action under the Administrative Procedure
Act.
Cf
. 5 U.S.C. § 551,
et seq.
;
Nat'l Nutritional Foods Ass'n v. Weinberger
,
[13] This sentence states in full: In the event of judgment of the judicative board already having the permanent force of law and admitted by the Indonesian law stating that the Company and Grantors are obliged to make payment due to the drawdown of any guarantee provided in the issue of Senior Notes, then such obligation payment will be made by the Company by following the provision of Clause 3.6.IV and the obligation payment portion will reduce the payment portion of Senior Notes Proceeds Fund Debt equally[.]
[15] One of the Objecting Noteholders—Footbridge Capital, LLC, a Delaware limited liability company—is a U.S. based creditor, see Foreign Representative’s FFCL ¶¶ 124–132, and thus the considerations as to just treatment and protection against prejudice in Sections 1507 and 1521 are implicated here.
[16] In reaching its result, the Court in
Metcalfe
also observed that “U.S. federal courts have repeatedly granted
comity to Canadian proceedings.”
In re Metcalfe & Mansfield Alt. Invs.
,
[17] The failure to produce a document at trial may result in an adverse inference if “(i) the party having control
over the evidence had an obligation to preserve or timely produce it; (ii) the party that destroyed or failed to
timely produce evidence had a ‘culpable state of mind’; and (iii) the missing or tardily produced evidence is
‘relevant’ to the party's claim or defense ‘such that a reasonable trier of fact could find that it would support that
claim or defense.’”
In re NTL, Inc. Sec. Litig.
,
[18] The minutes of the second and third creditors’ meetings before the Administrators and a Supervisory Judge do not provide much more information. See ONX-145; ONX-146. During the second creditors’ meeting held in late 2014, for example, the Administrators disallowed the Indenture Trustee’s claims because of concerns of “double claim[s] from several parties,” including the Indenture Trustee and the noteholders. See ONX-145 at 5. At the third creditor meeting, BTEL’s counsel argued that the Assignments did not transfer the right to collect the debt to BNY Mellon, the Indenture Trustee. ONX-146 at 4. During this third creditor meeting, the Objecting Noteholders’ Indonesian counsel ultimately appealed the Administrators’ decision to disallow the Indenture Trustee’s claim to the Supervisory Judge. ONX-146 at 3. After consulting with the Administrators, the Supervisory Judge upheld the Administrators’ determination, once again relying on the same grounds as the judgment: “The Administrators concluded that the Verification Meeting, the guideline in verifying the receivables is Article 271 of Bankruptcy Law, which determined that each bill submitted during PKPU process should match the Debtor records.” ONX-146 at 4–5; see also Stipulation ¶¶ 77–80.
[19]
See also In re Hotel Assocs. of Tucson
,
[20] This was true despite the Court noting the lack of such evidence in its prior summary judgment decision.
In re PT Bakrie Telecom
,