Can Indonesian corporates get away without repaying bonds?

Maybe. We talk to an experienced Herbert Smith corporate partner about the implications of the Supreme Court's decision to uphold a ruling that a $500 million bond transaction was invalid.
IndonesiaÆs Supreme Court recently upheld the decisions of lower courts when it said that a $500 million bond transaction was invalid, even though the transaction adopted a common offshore structure for raising debt funding. We talk to long-term Jakarta-based Herbert Smith corporate partner, David Dawborn, to help understand the ramifications of the decision.

To start with, can you explain the background

The case involves three bond issues, amounting to $500 million, made by Indah Kiat International Finance Indah Kiat BV in 1994. The bonds were issued to foreign bond purchasers in order to raise foreign currency finance and were guaranteed by PT Indah Kiat Pulp Paper Tbk Indah Kiat, an Indonesian listed company.

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