Indonesia’s biggest listed construction firm intends to defer payment of 2.3 trillion rupiah ($151 million) due next week on a bond and halt coupon payments on three others. The stock exchange halted trading in its shares.
(Bloomberg) — Indonesia’s biggest listed construction firm intends to defer payment of 2.3 trillion rupiah ($151 million) due next week on a bond and halt coupon payments on three others. The stock exchange halted trading in its shares.
At a meeting on Thursday, PT Waskita Karya Persero asked bondholders to delay the payment of coupon and principal on notes due Feb. 23 until June 16, according to two people familiar with the matter, who declined to be identified because the matter is private.
The plan for the four bonds with a combined value of about 5 trillion rupiah is the most detail yet on a proposed restructuring of the company, which is the center of broader concerns about Indonesian builder debt that have prompted comparisons with crises in China and South Korea.
Indonesia’s exchange suspended trading in Waskita’s shares citing its failure to meet a debt payment obligation.
“To allow them to breathe, they need a debt standstill first,” Kartika Wirjoatmodjo, deputy minister of State-Owned Enterprises, said in an interview.
The official, whose ministry sets strategies for Indonesia’s state firms and also oversees their operations, had told Bloomberg about Waskita’s plan to delay payment on the maturing bond.
During the debt ‘standstill’ period, Waskita and the ministry will map out a comprehensive restructuring proposal which may include maturity extensions for bonds by an average five to seven years, as well as a possible debt haircut, Wirjoatmodjo said.
Waskita Karya is at the center of broader concerns about a spending spree over the past decade by Indonesia’s largest builders and developers, many of which are now highly levered and face looming maturities. The country’s top four construction firms including Waskita Karya have seen their total debt surge to roughly 130 trillion rupiah since President Joko Widodo took office in 2014.
Coupon payments on three other notes that are due prior to the end of June 16 standstill period will be deferred to the next quarterly payment schedule, one of the unnamed people said.
FINANCIAL MISMANAGEMENT
The former president director of Indonesia’s second largest lender by assets PT Bank Mandiri, who also oversaw the $9.8 billion debt restructuring of the country’s flag carrier PT Garuda Indonesia last year, said the complexity of the problem with Waskita made its debt restructuring “the worst” that he has to deal in his career.
“This was a combination of project undertakings that were too aggressive and have not been matched with good cashflow management,” Wirjoatmodjo, who also oversaw some major debt restructuring during his banker’s days, said. “This is no longer a perfect storm, it’s a perfect hell.”
The struggles are reminding some analysts and investors of the high-profile debt debacles involving builders in China and South Korea last year, and prompting warnings that financial strains may spread even further among Indonesian firms.
The amount due on Feb. 23 on the local security includes both principal and interest. Wirjoatmodjo said that the securities affected by the restructuring, which accounts for about half of the company’s total outstanding bonds, don’t have state guarantees. The coupon payments on debt securities with government guarantees will continue as usual, he said.
The company’s President Director Destiawan Soewardjono had confirmed the plan to ask investors to accept the delay.
Despite restructuring 29 trillion rupiah of bank loans in 2021, Waskita has appealed to the government for a fresh capital injection after the financial projections they made turned out to be too aggressive, and the company still couldn’t generate enough cash to finish the construction projects, Wirjoatmodjo said.
The restructuring roadmap will also include a plan by the builder to sell three toll roads to investors, the deputy minister said.
The firm also has 47.2 trillion rupiah of bank debt and total liabilities of 82.4 trillion rupiah, according to its latest quarterly financial results.
In a statement late on Wednesday, Waskita had said it will delay coupon payments, without giving details on the proposed length for those halts. The move would give the builder time to conduct a comprehensive review of its restructuring, and is not due to its inability to make the payment, according to the statement.
–With assistance from Fathiya Dahrul and Shen Hong.
(Updates with dates from second paragraph)
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