The local manufacturer of Adidas shoes, PT Prima Inreksa Industries (PII), is facing bankruptcy litigation for failing to pay debts worth more than US$37 million.

The plaintiffs are PII's leather supplier, CV Cisarua and state owned Bank Negara Indonesia (BNI). PII  has not yet paid its debts to either.

“The litigation is our last resort. We have tried the mediation process, but it always ended up with PII saying they don’t have the money to pay the bills,” Yakobus Eko Adrianto, a lawyer representing CV Cisarua, told The Jakarta Post on Tuesday.

Yakobus said legal steps were being taken because Cisarua observed that PII was still operating and employing about 5,000 workers, contradicting their claim of insufficient funds.

“There is no reason for them to be avoiding their obligations,” Yakobus said.

PII has failed to pay debts amounting to Rp 2 billion (US$168,000)  to Cisarua, on top of a larger $37.25 million outstanding debt to BNI.

According to data from the Industry Ministry, last year PII also had debts amounting to $8 million to suppliers.

The litigation was filed with Central Jakarta District Court on Commerce and was scheduled to commence on Tuesday, but due to the absence of a representative from PII, it was adjourned until next week.

“Should they fail to appear in next week’s trial, we will still proceed with the case. The court will proceed in absentia,” Yakobus said.

Contacted separately, PII president director Paulus Harli said he had no idea about the litigation and refused to comment further.

Yakobus said his client filed the case together with BNI because under the existing regulations, bankruptcy litigation requires at least two companies to act as plaintiffs.

The bankruptcy litigation is the latest problem faced by PII after its previous main buyer, the world’s second-largest sportswear manufacturer, Adidas Group, placed its final orders with them last year.

Adidas, which ordered 201 million pairs of shoes from the Indonesian shoe industry last year, had been ordering 500,000 pairs of shoes per month from PII since 1997.

Adidas and PII signed last August a final partnership agreement in which the final date for the termination of the business relationship was Dec. 31, 2008.”

PII was one of six Indonesian companies manufacturing sport shoes for Adidas.

Before facing the negative impacts of the global economic downturn affecting export orders and revenue, PII -- located in Banten, Tangerang -- produced up to 900,000 pairs of shoes annually for Adidas.

Adidas has been manufacturing sports shoes in Indonesia for about 20 years.

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