Nov. 6 (Bloomberg) — Indonesia’s Supreme Court has upheld a lower court’s decision to invalidate $500 million of bonds sold by a unit of Asia Pulp & Paper, Southeast Asia’s biggest defaulter, in a potential setback to sellers of corporate debt.
U.S. hedge funds Gramercy Advisors LLC and Oaktree Capital Management LLC failed to overturn the September 2004 ruling by Central Jakarta Court to invalidate bonds of Indah Kiat Pulp & Paper Co., Yan Partawijaya, corporate secretary of the Asia Pulp unit, said in a telephone interview from Jakarta. The ruling, made earlier this year, was released last week.
Asia Pulp’s controlling Widjaja family has been wrangling with creditors since freezing payments on a record $14 billion of debt in 2001. Corruption and weak legal institutions threaten to undermine investor confidence in Indonesia, where five credit rating upgrades since May 2002 have helped reduce the cost of borrowing in global markets.
