Indonesia aims for US$1.5 billion restructuring at Krakatau Steel

THE Indonesian government aims to finalise a loan restructuring agreement between the nation’s biggest steelmaker Krakatau Steel and its lenders next month, sources said.

The state-owned company and its banks have been in talks recently about the master restructuring agreement after a similar deal in previous years, they said, asking not to be identified because the discussions are private.

The total of rupiah-denominated and other loans to be restructured amounts to an equivalent of about US$1.5 billion, one of the sources added.

Founded in 1970, Krakatau Steel once hosted industrialists from China – eager to learn how their nation could accelerate its own output. Several decades later, the Indonesian company had to grapple with cheaper imports from a rapidly growing China and elsewhere. 

It sought government support to protect the local industry as it completed an earlier US$2 billion debt restructuring in 2020, after which Indonesian President Joko Widodo – or Jokowi, as he is popularly known – called for a cut in imports of low-quality steel. 

But a fire at one of Krakatau’s plants last year posed a further setback. After that, its finance director said that the company needed to restructure its loans. 

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A media representative for Krakatau Steel could not immediately comment when reached by Bloomberg News. There was no response from a representative for the State-Owned Enterprises Ministry.

Debt strains have also beset Indonesia’s construction industry, after a push by President Jokowi to build new infrastructure like toll roads and railways.

Construction companies Waskita Karya and Wijaya Karya signed a combined US$3 billion of debt restructuring deals with their lenders this year. BLOOMBERG