First Big Test: The Steps Taken by Indonesia’s New Gov to Rescue Failing Major Textile Manufacturer PT Sritex, Tempo

From Antara and Yudono Yanuar for Tempo.co, October 30, 2024

TEMPO.CO, Jakarta – President Prabowo’s government has prepared measures to save Indonesia’s largest textile factory, Sritex, from bankruptcy to avoid layoffs, while still respecting the ongoing legal process.

Indonesia’s newly minted Coordinating Minister for Economic Affairs Airlangga Hartarto (Golkar Party) revealed the government’s measures for saving PT Sri Rejeki Isman or PT Sritex, including by ensuring that the company’s continues operations.

Continue to operate

“Now the important thing is that the company is still running. Customs has also given permission for its imports and exports, although the management is now under the supervision of an administrator,” said Coordinating Minister Airlangga during a press conference at the offices of the Coordinating Ministry for Economic Affairs in Jakarta on Wednesday, October 30, 2024.

For the next step, the government continues to monitor developments in the proceedings before the courts. As a country based on the rule of law, he said, the government will respect the proceedings in accord with the law currently in force.

Administrator

“The court has appointed an administrator and the government will wait for the results of the administrator’s action. But for the government’s part, we hope the company will continue to operate,” he said.

While waiting on the legal proceedings, the government is preparing measures that can be taken so that the labor-intensive industrial sector as a whole does not experience systematic problems.

Some time ago, a number of textile companies also experienced problems, but they have been restructured. “So, of course restructuring is one of the actions that is being encouraged by the government,” he said.

On the other hand, investment in the textile industry has shown an increase, especially in Central Java province in areas such as Kendal, with the orientation mostly aimed at exports. “In facing global competition, the key is productivity,” said Airlangga further.

Emergency limited cabinet meeting

President Prabowo previously asked his ministry’s officials to make efforts so that there are no layoffs of Sritex employees and so that the textile company continues to operate.

This was stated by Indonesia’s week-old Minister of Manpower, Bandung Institute of Technology academic, Yassierli (Prosperous Justice Party-PKS), after President Prabowo held a closed limited cabinet meeting with ministers including Coordinating Minister for Economic Affairs Airlangga Hartarto and long-serving Minister of Finance Sri Mulyani, yesterday.

Appeal

President Prabowo, said Minister Yassierli, stated that the government would not allow layoffs to occur of Sritex employees. The government believes that layoffs will not happen because the option to file an appeal against the decision of the Semarang Commercial Court will be taken.

Mounting Debt

Based on the consolidated financial report as of June 30, 2024, Sritex had total liabilities of US$ 1,597,894,876 (around Rp25 trillion). These liabilities are dominated by long-term liabilities of US$ 1,466,477,101 or around Rp23 trillion.

BCA largest of 28 creditor banks

In addition, Sritex’s long-term financial liabilities are dominated by bank debts of US$ 809,994,386 (Rp12.7 trillion). Bank Central Asia (BCA) is a creditor with a loan value of Rp1.12 trillion and is the largest of the 28 lending banks. Another major creditor is state-owed enterprise PT Bank Negara Indonesia (Persero) Tbk, with an exposure to Sritex of US$ 23,807,151 or around Rp374 billion.

BNI Corporate Secretary, Okki Rushartomo admitted that he continues to monitor developments in the Sritex bankruptcy proceedings in the Semarang District Court.  Currently, he said, BNI is coordinating with the government, especially the Ministry of State-Owned Enterprises (BUMN), headed by newly re-appointed Widodo Administration Minister Eric Thohir, and the Ministry of Finance, to discuss next steps.

“We respect the ongoing process related to the filing of an cassation appeal that Sritex is currently filing,” Okki told Tempo on Tuesday, October 29, 2024.

Executive Vice President of Corporate Communication & Social Responsibility at BCA, Hera F Haryn, said that BCA respects the legal decision of the Semarang Commercial Court which declared PT Sri Rejeki Isman Tbk. bankrupt.

Hera said that BCA is open to coordinating with all the relevant stakeholders, including the administrator appointed by the court, to achieve the best solution for the debtors and creditors.

According to the President Director of PT Sritex, Iwan Kurniawan Lukminto, his party and the creditors had initially agreed to settle the debt through a Suspension of Debt Payment Obligations (PKPU).

Settlement

“There we went through a fairly long process, the debts that our company has have one arrangement, that is a homologation agreement or debt payment agreement. That is to say that for a debt for example of 5 years, then it was extended to 7 years, a debt of 6 years was extended to 9 years. So there was the opportunity of more time for payment,” said President Director of PT Sritex, Iwan Kurniawan Lukminto.

However, PT Indo Bharat Rayon subsequently filed for cancellation of the settlement and filed for bankruptcy.

Hammam Izzuddin contributed to the writing of this article for Tempo.com.

This article is based on https://bisnis.tempo.co/read/1935189/ini-langkah-yang-diambil-pemerintahan-prabowo-dalam-menyelamatkan-sritex and is not authorized.

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