Debtor
Restructurings are time critical situations each with unique challenges, complicated by the diversity of stakeholder groups, particularly in cross-border situations or those involving public companies and/or government institutions. These situations can be further pressurized by cash constraints, working capital erosion and security restrictions.
Corporations in such financial or operational distress inevitably are confronted with crisis events. It is critical in such situations to deal with the underlying problems in an appropriate, transparent, timely and effective manner.
We have advised companies in distress, across a range of industries, through crisis, working capital stabilization, and financial/operational restructurings. We will lead manage the restructuring process whether it is a voluntary out of court restructuring or through a court appointed administration process such as an Indonesian PKPU, a Singaporean or Hong Kong scheme or other processes.
Our restructuring and turnaround services include:
- Advising on formal and informal debt restructurings including: (i) Schemes of Arrangement; and (ii) Indonesian Suspension of Debt Payment processes (PKPU)
- Advising on financial crisis management and facilitating communications across all critical stakeholders
- Working capital stabilization and cash management
- Conducting operational and financial reviews and assessing sustainable debt levels and structures
- Managing interim situations and turnarounds (Chief Restructuring Officer or other Interim Directorships) during and post restructuring including:
- Developing and reviewing operational and structural cost reduction initiatives and implementation/execution of milestones
- Evaluating and implementing revenue enhancement opportunities
- Implementing restructuring schemes/plans
- Divesting assets
Case Study
Project TPPI
August 2014- Type of Case :
- Debt Restructurings and Turnaround Management
- Title :
- TPPI PKPU and Implementation
- Status :
- Closed December 2012 (PKPU) & August 2014 (Implementation)
- Value :
- USD 1.9 billion
PROJECT OVERVIEW
- A series of interruptions and external shocks prevented PT Trans Pacific Petrochemical Indotama (“TPPI”) from being able to service its debt obligations. After failed discussions with its creditors on restructuring its debts, two of its creditors filed a PKPU petition in the commercial court against TPPI. The majority debt holders included state-owned enterprises, distressed debt funds, hedge funds, oil traders and contractors.
- When we were brought in, TPPI was under the day-to-day control of Pertamina jointly with PT Perusahaan Pengelola Aset (Persero) (“PPA”). PPA was the majority shareholder while Pertamina as a minority. Other minority shareholders included foreign strategic investors and contractors.
- Our mandate was: (1) to manage the Company through the PKPU process from verification of creditor balances outstanding through negotiation of the restructuring terms and ending with management of the voting process and homologation of the court approved Composition Plan; and (2) the implementation of the agreed court approved Composition Plan post PKPU.
PROJECT ISSUES
- Prolonged operational issues and interruptions stripped cash from the Client, making future operations doubtful. Furthermore, it was also clear that the Client had little chance of ever servicing its outstanding debts.
- Stakeholder-creditors consisted of parties with differing interests, which complicated the negotiation process.
- The pre-existing complex, multi-tiered, interrelated debt structure of the Client required that any proposed debt restructuring terms remained fair to these debt holders relative to each other.
- Failure to implement the terms of the Composition Plan would put the Client at risk of liquidation.
WHAT WE DID
- Prepared a financial forecast to simulate free cash flow, assessed critical and urgent cash needs of the Client, assessed working capital and capex of the Client. We incorporated these into the proposed composition plan where the Client was able to (1) raise short term cash via bridging loans and/or tolling operation, (2) raise priority financing for working capital and capex with priority security rights.
- Defused the high tensions that had built up with and among the creditors by initiating, organizing, and moderating multiparty discussions.
- Represented the Client in negotiations with key creditors in securing their votes in PKPU court, and agree a commercially viable structuring scheme.
- Worked side by side with the Client’s appointed legal counsel to manage the Client through the PKPU process successfully.
- Together with the Client and its legal counsel, we drafted implementing documentation, which included 3 tranches of note documents, security documents, agency agreements, share subscription agreements and amended articles of association.
- Assisted the Client to negotiate a tolling arrangement to meet short term cash needs.
PROJECT OUTCOME
- The composition plan was approved by the creditors and prompted the court to lift the PKPU status of the Client.
- The write off USD 330 million from outstanding debts.
- Restructuring of the existing secured debt in the amount of USD 888 million into a three multi-tiered tranches for up to 18-year maturity into Euroclear bonds.
- Conversion of USD 636 million of outstanding debts into newly issued equity.
- Amended articles of association that reflected the terms of the Composition Plan.
