Indonesia’s Waskita to Delay Bond Payment, Deputy Minister Says

Indonesia’s biggest listed construction firm will seek to defer payment of 2.3 trillion rupiah ($151 million) due next week on a bond and halt coupon payments on three others, a deputy minister said.

(Bloomberg) — Indonesia’s biggest listed construction firm will seek to defer payment of 2.3 trillion rupiah ($151 million) due next week on a bond and halt coupon payments on three others, a deputy minister said.

The comments are the most detailed yet on a proposed restructuring of PT Waskita Karya, which is at the center of broader concerns about Indonesian builder debt that have prompted comparisons with crises in China and South Korea.

Government-owned Waskita Karya will ask investors to back the measures — to be in force for six months — at a two-day bondholder meeting starting Thursday, Kartika Wirjoatmodjo, deputy minister of State-Owned Enterprises, said in an interview.

 “To allow them to breathe, they need a debt standstill first,” said Wirjoatmodjo, whose ministry sets strategies for Indonesia’s state firms. It also oversees their operations and issues including debt restructuring. 

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.

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. He didn’t give further details on the other interest payments included in the proposed delay.

The company’s President Director Destiawan Soewardjono confirmed the plan to present the proposal to bondholders during the meeting and said that the six-month deferral period will be discussed with the noteholders.

Despite restructuring 29 trillion rupiah of bank loans in 2021, Waskita has appealed to the government for a fresh capital injection.

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 on Wednesday, Waskita said it will delay coupon payments on certain bonds, 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.

The minister also said: 

  • The company 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
  • Coupon payments on debt securities with government guarantees will continue as usual

–With assistance from Fathiya Dahrul and Shen Hong.

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