SINGAPORE (Oct 16): An Indonesian mobile-phone retailer 44.9% owned by Singapore-listed Polaris, said it may not meet obligations indefinitely as it tries to avoid a “worst-case scenario” of seeking local court protection, in a case involving the Singapore dollar bond market that hasn’t had a default in six years.

PT Trikomsel Oke will form a steering committee and hold a call on Oct 26 to discuss possible restructuring options with noteholders, it said in a stock exchange filing Thursday, after hiring FTI Consulting to advise on a debt restructuring plan. The company, which has two debentures denominated in the Singapore dollar among 6.2 trillion rupiah ($635 million) of bonds and loans outstanding on June 30, cited weakening earnings and cash flows due to a slowdown in the economy and a slump in the rupiah.

Indonesia’s rupiah has slumped this year amid a rout in emerging-market assets, forcing the company to review its debt load. The rupiah has fallen 7.7% against the US dollar so far this year, making it the worst performing currency in Asia after the Malaysian ringgit.

Trikomsel hasn’t missed any obligations, and the last restructuring or failure in the market for Singapore dollar securities was in 2009 when Celestial Nutrifoods ( Valuation: N/A, Fundamental: N/A) and Sino- Environment Technology Group defaulted, data compiled by Bloomberg show. Indonesia’s debt suspension proceeding known as PKPU is part of its insolvency law that allows a petitioner 270 days to implement a workout plan.

“PKPU, at this stage, is too early to discuss,” Juliana Samudro, a company director, said by phone on Wednesday. “There’s still some internal discussion that we are supposed to do on our homework and assessment. We are just trying to preempt the worst-case scenario, as early as possible.”

Ashurst LLP
Jakarta-based Trikomsel may consider hiring law firm Ashurst LLP as legal counsel to work with FTI Consulting, according to people familiar with the matter who asked not to be identified because the details are private. The company is considering its options, said Samudro said.

Samudro is also the chief financial officer and an executive director of Polaris. SoftBank Group, run by Japanese billionaire Masayoshi Son, still holds the 19.9% stake it had earlier this year, spokesman Matthew Nicholson said.

“While the group has substantially met its obligations as they fall due to date, it is becoming apparent that it may not be possible to do so indefinitely,” Trikomsel said in Thursday’s filing.

Trikomsel has sold $115 million of 5.25% three-year notes due in May 2016, and similar-maturity $100 million 7.875% bonds maturing in June 2017. The 5.25% notes dropped 2.75 cents, their biggest one-day decline since June, to 95 cents on the dollar as of 3.17pm in Singapore, Bloomberg-compiled prices show.

Smaller telecom firms that borrowed offshore have defaulted recently, according to Singapore-based Raymond Chia, head of credit research for Asia ex-Japan at Schroder Investment Management. Among recent cases are PT Bakrie Telecom in 2013 and PT Mobile-8 Telecom in 2008, he said. “This is exerting some pressure on the high-yield borrowers.”