(Sept 3): A Singapore court’s landmark decision allowing administrators of bankrupt Indonesian textile maker PT Sri Rejeki Isman to pursue assets in the city-state may open a new route to recoveries for investors in other insolvent Indonesian firms with links to Singapore.

The Singapore International Commercial Court last week published a ruling detailing its recognition of the bankruptcy of the company also known as Sritex, once one of Indonesia’s biggest garment makers. The court also allowed its administrators to secure and investigate the company’s assets in Singapore.

That could be a big relief for creditors of Sritex who have been left asking what happened to the proceeds of US$725 million (RM2.93 billion) of bonds that were listed on the Singapore Exchange between 2016 and 2020. The administrators told the court they didn’t know how the money was used, whether it was sent to the Indonesian companies or whether any of it remained in Singapore.

“To my knowledge, it’s the first published recognition of an Indonesian corporate bankruptcy in Singapore,” said lawyer Smitha Menon, a partner at WongPartnership. “The most immediate practical impact is likely in the area of tracing offshore bond proceeds.”

Singapore has served as a restructuring hub for troubled Indonesian borrowers including flag carrier PT Garuda Indonesia, garment maker PT Pan Brothers and the ongoing process for property developer PT Modernland Realty. But the ruling on Sritex empowers administrators of bankrupt Indonesian firms to investigate and chase assets there that may benefit creditors. 

“Historically, it has been difficult to pursue recoveries against Indonesian borrowers outside Indonesia, so the Singapore court’s recognition of Sritex’s Indonesian bankruptcy is a significant practical development,” said Julian Kwek, co-head of corporate restructuring and workouts and head of Indonesia group at Drew & Napier.

“It provides Indonesian insolvency office-holders with a clearer route to seek evidence and assistance concerning assets, recoveries and transactions in Singapore, where there is sufficient legal basis to do so,” Kwek said.

Sritex, which has sewn clothes for global brands including H&M, Uniqlo and Zara, was declared bankrupt by an Indonesian court in 2024 after it fell into distress during the pandemic as orders slumped.

“The curators will be exploring all possible avenues to recover Sritex’s assets,” said Remy Choo Zheng Xi, founder and director of RCLT Law Corporation, which represented the Sritex administrators in the Singapore proceedings. The administrators have obtained approval from an Indonesian court to probe and pursue Sritex’s assets outside the country, he said.

The Singapore court, however, stopped creditors from enforcing security over Sritex’s property in Singapore without permission from the court or the administrators. The judge said the restriction was justified in Sritex’s case due to concerns that some security may have been improperly granted.

“The allegations of fraud, embezzlement and corruption — including the disbursement of fraudulent loans — suggest there may be grounds to challenge prior transactions, security arrangements or asset transfers,” Menon from WongPartnership said.

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