Davomas solicits consents for 11% notes after suspension of payment

By Jennifer Chiou

New York, Sept. 30 - Davomas International Finance Co. Pte. Ltd. and PT Davomas Abadi Tbk. announced the start of a consent solicitation for the $238 million of 11% guaranteed senior secured notes due 2011 issued by Davamos International.

The companies also noted that they have experienced a significant reduction in customer demand for their cocoa products, causing a reduction in cashflow and cash and cash equivalents.

Davamos said that in order to preserve its cash, it did not pay the $13.09 million of interest that was due on May 8. Following the 30-day grace period expiration on June 9, this constituted an event of default.

On Aug. 21, the company said that a temporary 45-day suspension of debt payment decision was issued by the Commercial Court of Central Jakarta after two holders of $200,000 of the 11% notes filed a debt payment suspension petition.

As already reported, the court appointed Swandy Halim as the administrator in the company's suspension of payment proceeding and scheduled a hearing for creditors to vote on any composition plan for PT Davomas Abadi Tbk.

Holders of about 67.88% of the notes approved the composition plan on Sept. 14. They represent nearly 99.87% of the principal amount of 11% notes.

The companies are soliciting consents from holders of at least 75% of the notes to allow them more flexibility in the implementation of the composition plan. Specifically, they are seeking the ability to exclude noteholders in jurisdictions that would require Davamos or its subsidiaries to file "burdensome" registration, filing or reporting requirements in any offer or payment for the notes, according to a news release.

The solicitation ends at 5 p.m. ET on Oct. 9.

Davamos will pay $0.20 for each $1,000 principal amount of notes as a consent fee.

PT Davomas had already appealed the payment suspension. Since the appeal had been unsuccessful, the company filed a composition plan to be voted on by its creditors.

As already noted, since there is uncertainty as to whether a composition plan approved under the Indonesian Bankruptcy Law will be recognized or enforceable outside the Republic of Indonesia, the company said it intended to launch an exchange offer for the notes after the composition plan is approved.

If the composition plan had not been approved by the company's creditors within the 45-day period, the court would have immediately declared PT Davomas bankrupt unless the creditors attending the hearing agreed to grant the company a permanent suspension of debt payment, which could not exceed 270 days after the date of the temporary suspension.

If the company had been declared bankrupt, a curator would have been appointed to liquidate PT Davomas' assets for the benefit of its creditors.

Bondholder Communications Group is the information agent (pdavis@bondcom.com or 44 207 382 4580 or 212 809-2663).

Davomas International is a Singapore-based special purpose vehicle of Indonesian cocoa producer P.T. Davomas Abadi Tbk.

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