Pakuwon Jati lacks fund to repay bonds
Zakki Hakim, The Jakarta Post, Jakarta
Surabaya-based property company PT Pakuwon Jati has announced that it is short of money to repay its debts. It has only Rp 17 billion (US$1.9 million) to pay its first bonds maturing on June 28, 2003 and none for its second bonds maturing on Dec. 17, 2003.
Company president Esron Siburian reported on Wednesday its financial situation to the Surabaya Stock Exchange (SSX).
The first bonds amount to Rp 150 billion, of which the company has repaid Rp 40.05 billion, leaving Rp 109.95 billion outstanding. These bonds are part of its total debt of US$128.8 million.
Meanwhile, the second lot of bonds are worth Rp 200 billion, of which the bondholders have been paid Rp 49.85 billion and are expecting the remaining Rp 150.15 billion.
"To repay of the outstanding amount of the first bonds we have allocated Rp 17 billion, but for the second bonds we have no money because our project has yet to operate," Esron said in the report to SSX.
He said, however, his company would propose restructuring the first bonds at a general meeting with bondholders on May 27 and the restructuring of the second bonds at a meeting on May 28.
Agus Salim, an analyst for fund managing company Danareksa, said if restructuring took place it would be the second time Pakuwon Jati had restructured debts after it defaulted in 1997.
In the 1997 restructuring, some of the debts were settled through the sales of assets and the rest through a bilateral settlement that resulted in the issuance of the current bonds, he told The Jakarta Post on Wednesday.
He added that Pakuwon Jati was not the first company to default on bonds. He named some other defaulted companies, most of which operated in the property sector.
"The government should provide a legal basis to protect investors," he said, considering that not all settlements went in favor of the investors.
He said the government should formulate some regulations on the bond market to deal with mischievous bond-issuers.
However, despite some defaulting bond-issuers, the bond market remained attractive due to the drop in bank interest rates to about 11.40 percent per annum at present from over 17 percent at the beginning of last year, he said.
Actually, to protect investors, the bonds issued recently were already equipped with more-binding covenants and safer collateral, he said.
He said that some bonds were now supported with warranties such as fixed assets and account receivables, etc.
Mirza Adityaswara, a financial market analyst, said the Pakuwon Jati case amid the rocketing trend of bond-based investment should serve as a warning for every investor to be more careful in investing their funds.