Resources Prima coal unit faces PKPU proceedings to avoid liquidation bankruptcy

SGX-listed coal mining firm Resources Prima Group Limited announced Saturday that the Jakarta Commercial Court has rescheduled to August 14 a hearing on a suspension of debt payment obligations (better known here as PKPU) filed by creditors against its debt-ridden main operating subsidiary PT Rinjani Kartanegara to help avoid liquidation.

The court hearing on the proposed PKPU was initially scheduled on August 7.

?PT Rinjani Kartanegara received a notice dated 8 August 2017 from the Commercial Court, Jakarta, relating to the rescheduling of the court hearing in respect of an application for suspension of payment against Rinjani submitted by M. Arifin and other creditor(s) of Rinjani,? Resources Prima said in a statement.

The company said that Arifin is a creditor of Rinjani, which operates coal mines in Kutai Kartanegara, in Indonesia?s East Kalimantan Province, in respect of land compensation arising from the removal of plants and the disturbance of land. ?The company has no knowledge on who are the other creditor(s) in respect of the (PKPU) application,? the statement said.

PKPU is part of Indonesia's 2004 Bankruptcy Law and provides creditors and debtors with an avenue to avoid liquidation bankruptcy. A PKPU gives a debtor the opportunity to prepare, negotiate and submit a composition plan to its creditors for their approval. The PKPU can be either initiated by the debtor or creditors.

?This (PKPU) procedure provides Rinjani temporary relief, allowing it to reorganize its business activities under the management of Rinjani?s directors together with a court-appointed administrator, under the supervision of a supervisory judge. Rinjani will be required to prepare a composition plan which will be subjected to review and approval by Rinjani?s creditors. Rejection of the composition plan by Rinjani?s creditors could result in Rinjani being wound-up by its creditors,? Resources Prima said.

On June 29, Resource Prima Group Limited said that Rinjani?s mining operations have been stopped since June 23 due to inability to meet financial obligation to mining contractor, PT Cipta Kridatama (CK) on time coal production and sales were reduced due to rainfall and dewatering problems at the mine.

RK?s inability to pay the US$2.5 million- comprising the remaining balance of the waste mining costs for the months of April and June 2017 and equipment rental costs from prior years- triggered a cross-default clause of the Debt Settlement Agreement with CK, resulting in the full amount of outstanding debt owed to CK by Rinjani, amounting to approximately $15.1 million at May 31, 2017, becoming immediately due and payable.

Rinjani also on June 14, received tax assessment letter demanding $5 million in corporate taxes payment.

The company said that Rinjani has contacted CK to negotiate the recommencement of waste mining operations and a rescheduling arrangement of all current amounts owed to CK.

On 28 June 2017, Rinjani received confirmation from CK of its willingness to meet representatives from Rinjani to discuss all relevant matters. As part of any potential negotiation with CK, Rinjani will explore the possibility of CK increasing production to economic levels thereby returning the company to profitability, the company said.

Resources Prima reported coal production of around 220,000 tons in the Jan-March quarter of 2017, a drop from 490,000 tons in the corresponding quarter of last year.

Editing by Reiner Simanjuntak