19-3-2024 (JAKARTA) In a bid to navigate through financial turbulence, two of Indonesia’s state-controlled construction behemoths are making headway in their efforts to restructure crippling debt burdens. Waskita Karya and Wijaya Karya (Wika), once at the forefront of the nation’s infrastructure drive, have found themselves grappling with the fallout from the COVID-19 pandemic and an overextension of borrowed funds.
Addressing a parliamentary hearing on Tuesday, Waskita Karya’s Chief Executive Muhammad Hanugroho disclosed that the company’s total debt stood at a staggering 41.2 trillion rupiah ($2.62 billion) as of the end of 2023, with bank loans accounting for 26.3 trillion rupiah of that sum. In a glimmer of hope, Hanugroho revealed that the company had submitted a restructuring proposal to its lenders last month, expressing optimism that a master restructuring agreement would be inked by April.
The debt-laden firm is also making strides in renegotiating its outstanding bonds, with investors in three out of four bond series agreeing to a restructuring scheme. Hanugroho stated that a meeting with the remaining group of bondholders is scheduled for March 22, as the company seeks to bring all parties on board with its financial rehabilitation plan.
Meanwhile, Waskita’s counterpart, Wijaya Karya (Wika), has already secured an agreement to restructure 20.7 trillion rupiah of bank loans in January, according to CEO Agung Budi Waskito. However, details of the agreement remain undisclosed.
The financial woes of these construction giants have reverberated throughout the Indonesian capital markets, with trading in their securities being suspended by the stock exchange since last year after both companies defaulted on their bonds. The COVID-19 pandemic and an overzealous pursuit of infrastructure projects fueled by borrowed funds have proven to be a potent combination, leaving the companies teetering on the brink of insolvency.
In a lifeline for Wika, the government has pledged to provide a 6 trillion rupiah capital injection by subscribing to the company’s planned rights issue this quarter. This move is aimed at enabling Wika to complete dozens of strategic projects that have been left in limbo amid the financial turmoil.
Agung revealed that Wika will also seek to raise an additional 3.2 trillion rupiah through a public offering during the rights issue, bringing the total targeted amount to be raised to 9.2 trillion rupiah. This influx of capital is seen as a crucial step in stabilizing the company’s financial footing and restoring investor confidence.
