CP Prima bondholders face dilution by Chearavanont-backed cash call

By John Aglionby in Jakarta
Published: May 12 2009 03:00 | Last updated: May 12 2009 03:00


International bondholders who recently gained control of CP Prima, the world's largest shrimp producer, after a debt default are accusing the Indonesian company and its previous majority shareholder, Thailand's prominent Chearavanont family, of attempting to retake control of the company in breach of agreements.
The bondholders, who include British and US investors, could see their stake in CP Prima fall from more than 70 per cent to less than 30 per cent today if Indonesia's market regulators allow an emergency general meeting to proceed.
The meeting is being asked to approve a rights issue in spite of bondholder attempts to have it halted.
The agreements, seen by the Financial Times, say neither the family, which controls the Charoen Pokphand Group, nor the company are allowed to take action that would harm the bondholders' interests.
Fajar Rexoprojo, a CP Prima spokesman, acknowledged that the agreements' existed but denied knowledge of clauses in them that any rights issue would violate.
The dispute is being seen as a key test of the protection afforded to bondholders in Indonesia and the ability of the market authorities to perform effectively.
Todung Mulya Lubis, the bondholders' Indonesian lawyer, described the case as "a very bad precedent for Indonesia".
The case began in June 2007 when nine investors, predominantly foreign hedge funds, bought $200m of bonds from four companies controlled by the Chearavanont family, who gave as collateral 70 per cent of CP Prima, which is listed on the Indonesian stock market.
At the time the shares were worth almost Rp9,500bn ($910m).
When CP Prima shares crashed in 2008 the family did not top up the collateral sufficiently and fell into default in October 2008, thereby handing the collateral to the bondholders.
After the family defaulted CP Prima announced it would issue 17.23bn new shares with the standby buyer being Pertiwi Indonesia, also controlled by the Chearavanont family.
Bapepam, Indonesia's market regulator, blocked the first attempt to complete the rights issue.
Nobody at Bapepam was willing to comment on the case yesterday.
Pertiwi is today expected to acquire the majority of the new shares, leaving the Chearavanont family with more than half of the total shares while the bondholders would see their holding drop to 29 per cent.
Nobody from Pertiwi would discuss the case prior to today's meeting.

Copyright The Financial Times Limited 2009