Investors holding more than 25% of Bakrie Telecom’s US$380m bond due May 2015 are reportedly suing the Indonesian mobile carrier for missing two interest payments.
The group is alleged to have missed payments in November 2013 and May 2014, according…
Investors holding more than 25% of Bakrie Telecom’s US$380m bond due May 2015 are reportedly suing the Indonesian mobile carrier for missing two interest payments.
The group is alleged to have missed payments in November 2013 and May 2014, according to reports citing a lawsuit filed in a US court by Universal Investments Advisory, Vaquero Master EM Credit Fund, and Trucharm.
They also claimed that Bakrie Telecom does not plan to make the interest payments while it looks to restructure its debt, added the reports.
Bakrie Telecom could not be reached before the press deadline.
On 30 May, ratings agency Fitch downgraded Bakrie Telecom’s long-term foreign- and local-currency issuer default ratings to ‘restricted default’ (RD), following November’s missed coupon payment.
“Fitch believes that a distressed debt exchange (DDE) is inevitable, which is likely to lead to a significant loss for holders of the US$380m bond,” it said in a note at the time.
Prospects for M&A
The lawsuit comes as local publication Investor Daily cited Bakrie Telecom’s COO, Imanuddin Kencana Putra, confirming it was considering a merger with Smartfren, which is among the smallest players in Indonesia’s saturated mobile market.
He reportedly told the local paper that the two companies have signed non-disclosure documents concerning the possible merger.
Back in May, Fitch said a stronger operator or investor was unlikely to acquire Bakrie Telecom since its CDMA technology is gradually falling out of favour with users. Meanwhile, the ratings agency said other CDMA operators such as Smartfren were continuing to struggle to gain market share and also face liquidity problems.
“The country’s three biggest telcos, which use GSM technology, have sufficient spectrum assets,” it noted.
“Market leader Telekomunikasi Indonesia (BBB-/Stable) and second-largest operator Indosat (BBB/Stable) also intend to shut their CDMA segments and reallocate the spectrum for GSM use.”
