Omnipresence Reality: From Lehman Brothers to Sariwangi
Lehman Brothers
On September 15, 2008, Lehman Brothers, one of the largest investment banks in the world, filed for Chapter 11 bankruptcy protection, marking the largest bankruptcy in US history at the time with Lehman holding over $600 billion in assets. The bankruptcy filing was caused by a combination of factors, including its exposure to the subprime mortgage market, a significant amount of debt, and a decline in its stock price. The Chapter 11 bankruptcy allowed Lehman Brothers to reorganize its debts and assets while continuing to operate. The bankruptcy court appointed an independent examiner to investigate the company's collapse and determine if any fraudulent or illegal activities had taken place.
Luc Despins, a lawyer representing creditors, led the creditors committee as their counsel. The initial proposal by Lehman was revised on September 22, 2008, in which the brokerage part of Lehman would be sold to Barclays for £700 million, approved by the bankruptcy court. Barclays would absorb $47.4 billion in securities and assume $45.5 billion in trading liabilities. In the same day, Nomura Holdings, Inc. had announced that it agreed to acquire Lehman's franchise in the APAC region including Japan, Hong Kong, and Australia. On the following day, Nomura also announced its intentions to acquire Lehman’s investment banking and equities businesses in the Middle East and Europe. The deal with Nomura became legally effective on October 13, 2008.
While the case slightly deviates from the chart (Lehman was mostly acquired and had not fully paid all outstanding debt), the end goal of Chapter 11 bankruptcy was ultimately achieved, which was to avoid being liquidated by entering Chapter 7 bankruptcy.
Sariwangi Bankruptcy Case
Sariwangi, a well-known tea brand in Indonesia, has been in operation since 1979. However, in 2018, the company was declared bankrupt due to several factors including declining sales and profits, mismanagement, and increasing debt.
PT Sariwangi AEA had defaulted on credit given to them, most notable being the loan from ICBC for IDR 289 billion. That amount is not inclusive of outstanding loans to other creditors, amounting to IDR 1.05 trillion. Sariwangi’s inability to repay the loan resulted in creditors petitioning for bankruptcy in 2015, yet Sariwangi managed to settle with creditors and petitioned for their own PKPU (payment suspension) to the court. After thorough verification process, Sariwangi and its creditors reached a settlement (represented by number (1) in the flowchart). One example of such settlement terms, as with ICBC, were the following:
Principle Payment
Interest Payment
Despite the agreement, Sariwangi missed their payments. This term violation resulted in ICBC retracting the settlement and repetitioned to declare Sariwangi bankrupt (represented by number (2) in the flowchart). The court granted ICBC’s request and declared Sariwangi bankrupt.
The company’s assets were liquidated to pay off its creditors. Some of the assets were acquired by another Indonesian tea company, PT Pagilaran, which has continued to produce Sariwangi tea under license.
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April 2023 Newsletter