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JULY 2013
Legal Focus
63 Debt Refinancing and Restructuring
As many regions continue to experience financial difficulties in the aftermath of the financial crisis, Lawyer Monthly speaks to Mohamed Idwan (‘Kiki’) Ganie, the Managing Partner of Lubis Ganie Surowidjojo (LGS), about the issues that can arise within debt refinancing and restructuring in Indonesia.
Please introduce yourself, your role and your firm.
I graduated from the Faculty of Law of the University of Indonesia and hold a PhD in Law from the University of Hamburg. I am a Chairman of the Association of Indonesian Anti-Trust Lawyers, a member of the Regional Panel of the Singapore International Arbitration Centre (SIAC), and a fellow (FSIarb) of the Singapore Institute of Arbitrators.
We have seen an increase in commercial disputes and litigation due to cancellation of contracts and defaults in payment obligations.
I have more than 30 years of legal experience, and specialize in commercial transactions and commercial litigation, including alternative dispute resolution and I have acted as an expert in a number court and arbitration proceedings. My expertise covers general corporate/company law, banking law, finance, bankruptcy and restructuring, mining, investment, acquisitions,
infrastructure
projects/project finance, antitrust, and shipping/aviation, with a particular focus on corporate governance and compliance.
LGS was founded in 1985 by Timbul Thomas Lubis, Dr. Ganie and Arief Tarunakarya Surowidjojo. Since then, LGS has grown into the largest corporate transactions and corporate litigation firm in Indonesia. LGS has also obtained Lloyd’s Register Quality Assurance certifications of ISO 9001:2008 for Quality Management systems and ISO 14001:2004 for Environmental Management systems to ensure the quality of all aspects of the firm’s operations and services.
Reports show that the corporate default rate is increasing as companies in many regions continue to experience financial difficulties in the aftermath of the financial crisis. Is this something you would agree with? Please explain.
We have seen an increase in commercial disputes and litigation due to cancellation of contracts and defaults in payment obligations. We anticipate that insolvencies will increase and that there will be the need for debt restructuring and related disputes for at least the near term future.
What do you think are the advantages and disadvantages of a restructuring programme as opposed to insolvency?
An insolvency process is necessarily more rigid, while with a restructuring it is important to begin discussions on the possibility of restructuring payment obligations as early as possible so as to avoid a deterioration of the financial situation faced by the business. As such, restructuring is often preferable in cases where there is sufficient time to satisfactorily initiate the process as it allows for the affected business more flexibility than an insolvency process.
With insolvency it is important to consider the effects of insolvency on unrelated arbitration and court proceedings, whether commenced prior to or following the insolvency. The viability of such arbitration proceedings will be further affected by the location of the assets, and the view the local courts take on arbitration proceedings during insolvency. This is of particular importance to counterparties of companies that are at risk of facing insolvency proceedings and whose relationship is
governed by agreements with arbitration clauses. The Indonesian Bankruptcy Law states that upon the declaration of bankruptcy certain court proceedings against the insolvent party will terminate. The extent to which this, and certain other, provisions of the Bankruptcy Law apply to arbitration proceedings and the enforcement of arbitral awards also needs to be carefully considered.
What issues commonly arise in restructuring situations and how can they be overcome?
It is essential to keep in mind any ‘debt restructuring’ triggers that may be present in contracts to which the company is party to. And if present, to identify these and work with the relevant counterparties to prevent the occurrence of unintended consequences that could further complicate the process. Considering the above, it is advisable to work with counsel experienced in such matters from an early stage, so as to ensure that critical missteps are not made, which could later compromise the survival of the company or the success of the restructuring process. LM
Contact:
dr. Mohamed Idwan (‘Kiki’) Ganie Managing Partner Lubis Ganie Surowidjojo
Menara Imperium 30th Floor Jl. H. R. Rasuna Said Kav. 1 Kuningan Jakarta 12980, Indonesia
tel: +62 21 831-5005, 831-5025 Fax: +62 21 831-5015, 831-5018 Email: ganie@lgslaw.co.id Website: www.lgsonline.com