Indonesia's Wiluan family loses bid to prevent JM order for KS Energy

A SECOND shot by Indonesia's Wiluan family to fight key creditor OCBC's bid to place KS Energy and a key unit under judicial management (JM) failed on Tuesday.

In a two-hour-long JM hearing at the Singapore High Court that was hotly contested by the management of the ailing Singapore-listed oil-services firm, Justice Aedit Abdullah granted OCBC's application for the JM order.

The court has appointed Deloitte & Touche's Andrew Grimmett and Lim Loo Khoon as judicial managers of KS Energy and its key operating subsidiary, KS Drilling (KS Companies).

The latest development is a major blow to Indonesian tycoon and KS Energy founder Kris Wiluan, who had resisted the JM bid, and is separately facing 112 charges of alleged false trading and market rigging.

The 71-year-old Indonesian citizen and Singapore permanent resident had described OCBC's attempt to use the criminal charges against him as a basis for its JM application as "disingenuous", as the firm's share price has nothing to do with OCBC's loan facilities.

His son, Richard Wiluan, the firm's current chairman and chief executive, has also vehemently fought the JM bid by OCBC, the firm's super-majority creditor which holds up to 86 per cent of the total liabilities of KS Energy and its subsidiary.

Father and son together own nearly 66 per cent of mainboard-listed KS Energy. Trading in the shares of the offshore and marine firm, which provides drilling and rig services and specialised engineering and fabrication, has been suspended since Aug 12.

In a second affidavit filed in late September (after the appointment of IJMs to the firms on Aug 31), Mr Richard Wiluan claimed that both OCBC and the court-appointed officers failed to appreciate the firm's operational needs and lacked a commitment to its rehabilitation.

He went as far as to accuse the bank of engineering a default, saying the lender's real intention was to wind up the firms. OCBC, responding in an affidavit this month, denied the allegations as "frivolous, baseless and irrelevant", and said it did not care to engage in a "tit-for-tat exchange".

The bank pointed out that JM was in fact the "least drastic" option, given that it could have sought to wind up the firms as they were "hopelessly insolvent", or appoint receivers for their rigs. "Either option would have been a death knell for the KS Companies," said OCBC in court documents.

Mr Wiluan also alleged that the IJMs were too focused on recovering the funds for OCBC at the expense of other creditors. In addition, given the IJMs' inexperience, he said the company was losing time and missing opportunities to tender for projects.

In his reply affidavit, Mr Grimmett said no launched tenders had been brought to the IJMs' attention by the management. He added that these opportunities may not be viable, as they entail substantial upfront costs - and the group lacks financial resources.

He added that the IJMs have concluded that the KS Companies would not be able to continue as a going concern without comprehensive business and debt restructuring under OCBC's auspices.

OCBC applied to place the mainboard listed firm and its unit under JM in August after it sent letters of demand to the firms as well as six other subsidiaries for a US$230.7 million term loan and a S$5 million bridging loan to KS Drilling. KS Drilling is an 80.09 per cent-owned subsidiary of KS Energy, which has provided US$150 million in guarantee for the term loan.

Sarjit Singh Gill SC and Daniel Tan from law firm Shook Lin & Bok are lead counsel for the bank.