Examining the Restructuring of State-Owned Construction Issuers Ahead of 2026 Merger

Debt restructuring has become a critical step for state-owned enterprise (SOE) construction issuers to improve their financial positions while preparing for a consolidation plan targeted for the end of 2026.

Recently, PT PP Tbk (PTPP) signed a Master Restructuring Agreement (MRA) with four creditor banks, namely PT Bank Mandiri (Persero) Tbk (BMRI), PT Bank Rakyat Indonesia (Persero) Tbk (BBRI), PT Bank Negara Indonesia (Persero) Tbk (BBNI), and PT Bank Syariah Indonesia (Persero) Tbk (BRIS). PTPP Finance Director Faizal Rahmad stated that the total debt owed to all creditors under the MRA, including both principal and interest as of July 2026, amounts to Rp 18.2 trillion. The MRA will become effective following a General Meeting of Shareholders (RUPS) and the fulfilment of several conditions outlined in the agreement.

This year, PT Adhi Karya Tbk (ADHI) also plans to undergo restructuring with banks, targeted for completion in the second half of 2026. ADHI Corporate Secretary Siswanto noted that the value and scheme of the restructuring are in the final stages of discussion with creditors and will be announced once an agreement is reached.

WSKT previously signed an MRA in 2024 with nine banks, including regional and international lenders such as BJBR, BTPN, BBNI, BNLI, PNBN, NISP, Resona Perdania, BNP Paribas, and Shinhan. WSKT is restructuring bank debt with a total principal amount of Rp 26.21 trillion. Similarly, in 2024, WIKA completed an MRA with outstanding debt valued at Rp 20.79 trillion.

Notably, several debt instrument restructurings, including sukuk and bonds, are still ongoing for these issuers. Shares of WSKT, WIKA, and ADHI have been suspended by the Indonesia Stock Exchange (BEI) due to defaults on coupon and principal payments for several debt instruments.

Edwin Sebayang, Director of Purwanto Asset Management, stated that the condition of SOE construction companies has entered a phase of structural restructuring rather than just a weakening business cycle. The fact that PTPP has signed an MRA for obligations of approximately Rp 18.2 trillion demonstrates real liquidity pressure and debt structure issues. However, this does not necessarily mean these issuers are unable to pay bonds or face identical risk levels. He noted that ADHI and PTPP remain relatively better positioned than WIKA and especially WSKT, although both face serious challenges.

During the period of massive infrastructure expansion, these SOEs pursued new contract growth, revenue increases, strategic project development, and long-term investments. Sebayang advised investors to closely monitor operating cash flow, cash conversion, accounts receivable, interest-bearing debt, short-term debt, interest expenses, debt maturity, refinancing capabilities, equity, and potential impairment.

Sukarno Alatas, Senior Equity Research Analyst at Kiwoom Sekuritas Indonesia, reported that for the first half of 2026, PTPP’s EBITDA was approximately Rp 445 billion, while interest expenses reached Rp 1.05 trillion. Consequently, the EBITDA interest coverage ratio (ICR) was only 0.43x, indicating that operational capacity is insufficient to cover interest expenses independently. An EBITDA ICR below 1x is considered a poor result.

Sebayang suggested that asset monetisation could serve as a cash source to improve financial structures, though there are limits. If companies continue to sell their best assets merely to pay debt while core businesses fail to generate cash, the company may find temporary relief at the expense of its future income base. Therefore, divestment must be strategic deleveraging rather than a ‘fire sale’.

There are at least three main scenarios regarding the restructuring of SOE construction firms next year. First, PTPP and ADHI could achieve significant re-rating as the market currently applies a large discount due to uncertainty. Second, improvement could be slow, where companies avoid acute liquidity crises but face moderate revenue growth, thin profits, and unstable cash flows. Third, restructuring might only buy time until failure, occurring if operating cash flow remains negative, new projects require high working capital, or debt servicing remains unsustainable.

Sebayang views PTPP and ADHI as having relatively better resilience. WIKA remains a difficult turnaround story, while WSKT faces the greatest fundamental challenges due to a combination of losses, high liabilities, and a very thin equity cushion. For PTPP investors, the focus has shifted from ‘how many new contracts are secured’ to operating cash flow, receivables collection, interest expenses, and debt reduction.