Indonesia’s Krakatau Steel received approval from creditors to restructure around $2bn in loans to avoid bankruptcy.
The respite will allow the country’s largest steelmaker to meet its goal of expanding production capacity to 10mn mt annually by 2025, to meet close to 50pc of Indonesia’s domestic production needs.
The state-owned steelmaker has been in negotiations with 10 foreign and local banks since September 20, 2019 with four Indonesian banks holding the largest stake and comprising 81pc of total outstanding loans. Silmy Karim, the company’s president, said payments were rescheduled forward to 2027, due to the restructuring, resulting in reduced interest of $381mn.
The financial restructuring will also allow the company to continue operational improvements, chief of which would be a full review of all its subsidiaries and their impact on its profitability.
The steelmaker has denied rumors of imminent layoffs but indicated that 2,000 employees were scheduled for review and reassignment throughout its subsidiaries.
Krakatau Steel reported a revenue of $1.05bn for the first three quarters ended September 2019, down 17.5pc from the same period a year ago. Losses soared from $37mn in Q3 2018 to $212mn in Q3 2019.
The company is the largest producer of HRC in Indonesia with a capacity of 3.9mn mt annually at the end of 2019 which according to Karim can subsequently be expanded to 6.4mn mt per year.
According to Statistics Indonesia (BPS), steel imports into Indonesia increased by 6.7pc to 6.3mn mt in 2018. An estimated 6.7mn mt of steel was imported in 2019, up 7.5pc from the previous year.