AKARTA (TheInsiderStories) – Local manufacturer, PT Krakatau Steel Tbk (IDX: KRAS) has officially signed a debt restructuring agreement with six financial institutions. The management has said will use three schemes to restructure the company’ loans, use cash, divestment program and issue a convertible bond.
The debt restructuring was also carried out with the company’ subsidiaries, PT Krakatau Wajatama, PT Meratus Jaya Iron & Steel, PT KHI Pipe Industries, and PT Krakatau Engineering.
The participating banks are PT Bank Mandiri Tbk (IDX:BMRI), PT Bank Negara Indonesia Tbk (IDX:BBNI), PT Bank Rakyat Indonesia Tbk (IDX: BBRI), PT Bank ICBC Indonesia, the Indonesian Export Financing Agency, and PT Bank Central Asia Tbk (IDX: BBCA).
Krakatau Steel‘ Managing Director Silmy Karim said, with this agreement the company will get debt payment relaxation so the financial burden is reduced. The tenor of repayment period could also become longer.
“This is our effort to conduct a comprehensive debt restructuring in order to improves the financial performance more preferable,” Karim said on Monday (09/30).
He explained, this agreement is a follow-up of the previous agreement has been signed on July 12 to amend the old deal and the restatement of the Krakatau Steel business and financial transformation agreement. The series of agreements is also a continuation of the agreement signed on March 22, as a result of the shareholders meeting decision on April 26.
The contents of the agreement are, to complete business group loans that will be carried out starting this year. For ongoing loans, these will be settled through cash from operating results. Karim stated the manufacturer has the obligation to make payments and settle debts through the Tranche A scheme, which is sourced from operational funds, Tranche B from the divestment proceeds, and Tranche C1 derived from the rights issue.
“The restructuring can be carried out immediately, so the direction and financial goals can be realized and the company’s condition will gradually recover,” adds by the CEO.
Beside the six banks, the creditors of Krakatau Steel are PT Bank CIMB Niaga Tbk (IDX: BNGA), PT Bank OCBC NISP Tbk (IDX: NISP), PT Bank DBS Indonesia, PT Bank Danamon Indonesia Tbk (IDX: BDMN), and Standard Chartered Bank.
Director at Bank Mandiri, Royke Tumilaar has said, the state-owned bank was the biggest creditor of Krakatau Steel with values around Rp8 trillion followed by Bank Negara Indonesia worth of Rp5 trillion.
He said, through Tranche A scheme, KRAS will pay the loans using a cash flow in 8 to 10 years period. Tranche B through a divestment it’s subsidiary’ share in three years time. Krakatau Steel will pay half of the total loan with the worth of $1 billion using this scheme.
Then, Tranche C using a convertible bond. This scheme has the longest tenure because there are extended options in the proposed program. In addition, the steel maker and its creditors also changed the agreement that was once the master restructuring agreement to an ordinary credit agreement.
Earlier, Karim said that Krakatau Steel had a chance to spin off separate subsidiaries. The strategy was carried out as part of the steel producer’ debt restructuring. Its also being carried out with the aim that its unit is more efficient and increase productivity. It’s targeted the spin-off will be executed in the next two months.
In details, added by Karim, at least there are three business lines of the units that are ready to the spin-off, such as iron still making, long product, hot strip mill, and rolling mill. It’s estimated that the divestment of the subsidiary’ shares will be implemented until 2023.
Early September, Krakatau Steel has conducted its first production of hot rolled coil (HRC) steel from the results of its newest steel smelting plant, Blast Furnace. HRC produced at the Hot Strip Mill facility is free good or prime quality, so it meets commercial steel specifications. The total weight is 22.9 tons for each HRC.
With the production of steel slabs and HRC sourced from blast furnace, it will encourage the company to produce high value added products starting from production in the upstream areas. Its hoped that the company’ quality steel products can compete well, with a record that a healthy steel trading climate can be created in the domestic market.
Source: InsiderStory | 4 October 2019
Officially, Indonesia’s Krakatau Steel Signs Debt Restructuring with Six Lenders