(a) If a corporate debtor is in financial difficulty, is there an attitude of 'concealment' or 'denial' toward the admission or exposure of that financial difficulty?

Yes. Corporate debtors generally will try to conceal or deny financial difficulties from their creditors and governmental authorities. If lenders discover a debtor's financial difficulties, they may be quick to react and declare the corporate debtor in default. The reason for this is the unpredictability of the Indonesian judicial system and substantial questions whether creditors can effectively use the judicial system to recover outstanding debt.

(b) If so, is the reason for this based on cultural or other factors?

The most common reason for the corporate debtor to conceal or deny its financial difficulties is so that it will have sufficient time to solve them. While a cultural factor may be at play, in the sense of embarrassment at having suffered such a problem, this is not a key factor.

(c) Is it likely that a corporate debtor would:

(i) volunteer the fact of its financial difficulty to a lender or group of lenders; or

(ii) admit or concede it only if and when confronted by a lender or group of lenders?

As a general matter, the corporate debtor will try to conceal the financial difficulty and will only admit it when forced to do so by its lenders.

(d) If a corporate debtor is in financial difficulty, is it likely that the corporate debtor would:

(i) do nothing;

(ii) seek expert assistance and advice; or

(iii) accept the appointment by a lender of an outside expert/advisor?

The corporate debtor would usually try to seek expert assistance and advice from financial experts it feels it can trust.

(e) If it was agreed between a lender and a corporate debtor that an expert/advisor would be appointed, is it likely that a corporate debtor would give the expert/advisor unrestricted access to all relevant financial and other information regarding the corporate debtor?

This depends on the integrity and sophistication of the corporate debtor. A general response is not possible.

(f) In that situation, is it likely that the financial and other information regarding the corporate borrower would be:

(i) complete; and

(ii) accurate (particularly regarding the valuation of assets and the assessment of liabilities)?

The completeness and accuracy of the information again depends on the integrity of the management of the company.

(a) Is it more common that the financial difficulty of a corporate borrower will be:

(i) volunteered by a corporate debtor; or

(ii) discovered by a lender (and, if so, how)?

Usually the financial difficulty is discovered by rather than disclosed to the lender.

(b) If a lender becomes aware that a corporate debtor is in financial difficulty, is it likely that the lender would seek to investigate the financial crisis of the corporate debtor itself and employ an expert/advisor to investigate the financial position?

The lender will first investigate the corporate debtor itself. Subsequently, an expert/advisor may be employed to conduct an investigation, but this appears to be a rare occurrence.

(c) If so, is the expert/advisor likely to be:

(i) an independent professional; or

(ii) an 'in-house' employee of the lender?

The lender would probably like to use an "in-house" employee of the lender first, since this would be cheaper. Ultimately, an outside attorney will be consulted and an accountant may be used.

(d) Is it likely that information regarding the financial position of a corporate borrower as discovered from the work of an expert/advisor would be:

(i) kept secret from other lender/s or creditors;

(ii) disclosed to other/selected lenders?

It is likely the lender will keep such information secret from other lenders or creditors.

(e) If there were 2 or more lenders (not in a syndicate) involved with the same corporate borrower, is it likely that they would:

(i) join together to share information and endeavour to work out a common approach to the financial problems of the corporate borrower; or

(ii) act secretly and independently of one another?

Usually, lenders will act separately and will not share information or endeavor to work out a common approach to the financial problems of the corporate debtor. This is particularly true if one creditor is Indonesian and one is not.

(f) If there was a group of lenders (whether in a syndicate or not) involved with the same corporate borrower, is it likely that one of them would offer or seek to be the leader on behalf of them all?

Yes, in the case of a syndicated loan. In that situation, a manager or agent is often appointed in the loan documents. When there are different loan agreements, each lender tends to look after its own interests.

(g) If so, is it likely that such a proposal would be agreed to by the other lenders?

This depends on the situation. If having a leader will be to the benefit of all the lenders in negotiations with the corporate debtor, the proposal will be accepted.

(h) Is it likely that local lenders would have employees who are experienced in informal work outs?

Yes. This is possible.

(i) If there was foreign bank lending involved, is it likely that domestic lenders would:

(i) combine with; or

(ii) act independently of the foreign lender/s?

This will be decided case-by-case and depends on the facts of each individual case. In general, local lenders will act independently of foreign lenders.

(j) Is it likely that 'junior' or 'minor' lenders might seek to trade their debt?

This is possible, rather than likely.