BNY Mellon caught up in $4bn Jakarta lawsuit
By John Aglionby in Jakarta
Published: July 10 2009 17:13 | Last updated: July 10 2009 17:13
Bank of New York Mellon and Indonesia’s Bank Danamon are being sued for $4bn in Jakarta, and for an unspecified amount in London, for their actions in a $125m dispute between Thailand’s prominent Chearavanont family and international bondholders.
The case highlights the perils international investors face protecting their legal rights in Indonesia.
The country has this year become extremely popular for Asia-focused capital market investors due to its first quarter 4 per cent economic growth and stable political environment.
Four Jakarta court filings, obtained by the Financial Times, show four companies controlled by the Chearavanont family are each suing the banks, and thus effectively the bondholders, for $1bn for “causing very large losses to the claimants” for seizing their assets after allegedly deciding without proof that the companies were in default of their obligations to the bondholders.
The companies – Red Dragon, Regent Central International, Charm Easy and Surya Hidup Satwa – are also each seeking $1m per day for late payment of any damages.
The defendants, who say the action is “unwarranted”, are unlikely to have to pay any damages if they lose. According to someone close to the case, the banks have indemnity from the seven bondholders, who are international entities, mostly based in Asia.
The case began in July 2007 when the four companies pledged about $1bn worth of shares in Central Proteina Prima, a Jakarta-listed company that owns one of the world’s largest shrimp farms, to guarantee $200m in secured exchangeable bonds.
Their troubles began last year when CP Prima’s share price plunged.
Efforts to restructure the deal failed and bondholders ordered Bank of New York Mellon, the trustee, and Danamon, the security agent, to seize the collateral because they believed the companies had defaulted.
The bondholders then owned 70 per cent of CP Prima. But they have been unable to take control of the shares. In May CP Prima completed a rights issue, which diluted the bondholders’ stake to below 40 per cent.
This occurred in spite of the four companies and CP Prima promising in agreements seen by the FT not to do anything that would undermine the bondholders’ stake. CP Prima said it believes it is not party to the case.
Lawyers representing the plaintiffs declined to discuss the case.
Todung Mulya Lubis, the bondholders’ Jakarta lawyer, said the lawsuits are “ridiculous”.
Bank of New York Mellon told the FT: “We believe [the case] is unwarranted and we will defend ourselves vigorously.”
Danamon said the bank would follow the US bank’s lead.
Red Dragon and Pertiwi Indonesia, another Chearavanont-owned company, are suing in London. Peter Laskey, the lawyer representing them, said he was not authorised to discuss the case.
By John Aglionby in Jakarta
Published: July 10 2009 17:13 | Last updated: July 10 2009 17:13
Bank of New York Mellon and Indonesia’s Bank Danamon are being sued for $4bn in Jakarta, and for an unspecified amount in London, for their actions in a $125m dispute between Thailand’s prominent Chearavanont family and international bondholders.
The case highlights the perils international investors face protecting their legal rights in Indonesia.
The country has this year become extremely popular for Asia-focused capital market investors due to its first quarter 4 per cent economic growth and stable political environment.
Four Jakarta court filings, obtained by the Financial Times, show four companies controlled by the Chearavanont family are each suing the banks, and thus effectively the bondholders, for $1bn for “causing very large losses to the claimants” for seizing their assets after allegedly deciding without proof that the companies were in default of their obligations to the bondholders.
The companies – Red Dragon, Regent Central International, Charm Easy and Surya Hidup Satwa – are also each seeking $1m per day for late payment of any damages.
The defendants, who say the action is “unwarranted”, are unlikely to have to pay any damages if they lose. According to someone close to the case, the banks have indemnity from the seven bondholders, who are international entities, mostly based in Asia.
The case began in July 2007 when the four companies pledged about $1bn worth of shares in Central Proteina Prima, a Jakarta-listed company that owns one of the world’s largest shrimp farms, to guarantee $200m in secured exchangeable bonds.
Their troubles began last year when CP Prima’s share price plunged.
Efforts to restructure the deal failed and bondholders ordered Bank of New York Mellon, the trustee, and Danamon, the security agent, to seize the collateral because they believed the companies had defaulted.
The bondholders then owned 70 per cent of CP Prima. But they have been unable to take control of the shares. In May CP Prima completed a rights issue, which diluted the bondholders’ stake to below 40 per cent.
This occurred in spite of the four companies and CP Prima promising in agreements seen by the FT not to do anything that would undermine the bondholders’ stake. CP Prima said it believes it is not party to the case.
Lawyers representing the plaintiffs declined to discuss the case.
Todung Mulya Lubis, the bondholders’ Jakarta lawyer, said the lawsuits are “ridiculous”.
Bank of New York Mellon told the FT: “We believe [the case] is unwarranted and we will defend ourselves vigorously.”
Danamon said the bank would follow the US bank’s lead.
Red Dragon and Pertiwi Indonesia, another Chearavanont-owned company, are suing in London. Peter Laskey, the lawyer representing them, said he was not authorised to discuss the case.
