BTel creditors to vote on firm’s debt-to-equity swap proposal

9 Dec 2014

Creditors of Indonesian CDMA operator Bakrie Telecom (BTel), which defaulted on its bonds approximately twelve months ago, are voting on a plan to convert the majority of the ailing company’s debt into equity. Under the plan, BTel parent Bakrie & Brothers intend to convert 70% of the telco’s debt at a price of IDR200 (USD0.016) per share, according to company adviser Joel Hogarth of Ashurst, as reported by Bloomberg. The remaining 30% of debt will then be amortised over a five-year period, Ashurst added.

According to Telegeography’s GlobalComms Database, the debt restructuring plan follows a recent ruling from the Jakarta court ordering the telco to renegotiate a restructuring plan with its creditors by 9 December; in October this year, BTel supplier Netwave Multi Media filed forms for a court-supervised debt restructuring process against the carrier which owes it IDR4.7 billion in unpaid bills. In a filing to the stock exchange last month, BTel said: ‘The liability settlement scheme through steady cash payments will be divided among several groups [of creditors] according to the size of the obligations’. It is unclear whether Netwave will agree to BTel’s debt proposal.

BTel and fellow CDMA wireless service provider Telekom PT SmartFren (Smartfren) confirmed plans in November this year to merge their respective network operations in a tie-up that will make the former one of Smartfren’s shareholders. While neither side has divulged the value of the deal, nor indeed the size of the equity stake BTel will own, upon completion it intends to lease part of Smartfren’s network to serve its own customers. The move comes in the wake of BTel’s escalating financial woes: the carrier is also being sued by three bondholders in New York for its alleged failure to make two interest payments on a USD380 million bond. BTel booked gross revenue of IDR928 billion in the first six months of this year, down sharply by 28.9% from IDR1.31 trillion in H1 2013, as net revenue also slumped 30.5% year-on-year to IDR773 billion. Net income (loss) for the six months under review was IDR316.8 billion, on the back of a sizeable IDR292.7 billion loss in the corresponding year-earlier period. The plummeting net income came despite the operator booking a profit of IDR210.7 billion in Q1 2014; BTel’s second trimester saw it record a massive loss of IDR527.6 billion to wipe out the earlier gains.

Indonesia, Bakrie Telecom (BTel)