By
Bloomberg
Published
October 25, 2024
Indonesia's top clothing maker PT Pan Brothers is circulating a restructuring plan to its creditors for the first time since it missed a debt payment earlier this year, according to a person familiar with the matter.
Pan Brothers and its restructuring adviser have been presenting their debt renewal plan to bank lenders this week and will take the proposal to bondholders next week, said the person, who asked not to be identified because the discussions were private. It plans to reduce its debt load from about $325 million to $140 million, a level it considers sustainable based on a 15-year financial projection, the person added.
The company plans to convert its dollar bills in circulation and half of its bilateral loans into compulsorily convertible bonds, which will bear no interest and will be converted into shares after 10 years. The owners will control 51% of the textile maker's shares after the conversion, the person added.
Pan Brothers, once Indonesia's second-largest listed clothing maker, has been hit by the pandemic as exports decline. It defaulted on some loans in 2021 and got approval to restructure the debt that same year. But the industry has struggled with the post-pandemic recovery and the company defaulted on interest payments again this year. Its main rival, PT Sri Rejeki Isman, also fell into trouble again just two years after reaching a restructuring deal with creditors, and was declared bankrupt this week.
The plan proposed this time differs from Pan Brothers' last restructuring, where it primarily sought maturity extensions. The changes, such as reducing debt levels, suggest weakened confidence that the company will be able to pay creditors in full.
A company representative did not respond to calls, emails and messages from Bloomberg News seeking comment.
For the company's $123 million in syndicated loans, he proposes extending them at least 15 years with just 1% interest for the first five to six years. It also requests grace periods or a minimum number of principal payments during that period so that the company can use its operating cash flow as working capital.
The plan is subject to change after the company's negotiation with creditors. Under its court-supervised debt restructuring procedures, Pan Brothers' final debt proposal will need to be submitted to the court and approved by a majority of verified creditors collectively representing two-thirds of its total liabilities.
