Indonesian developer Modernland seeks bond restructuring again

[JAKARTA] Distressed Indonesian property firm Modernland Realty is seeking to restructure a US dollar bond for a second time, highlighting liquidity challenges facing the builder of residential and industrial townships.  

The company is proposing to push out the maturity of its US$274.5 million dollar bond due next year and ultimately exchange it for perpetual securities backed by assets transferred to a creditor-controlled vehicle, according to a filing on Friday (Aug 14). 

The developer plans to implement the restructuring through a pre-packaged Singapore scheme of arrangement, it said.

Modernland was among property firms in Asia that struggled to make debt payments after the coronavirus pandemic hit operations. Its multiple restructuring attempts underscore the challenges lingering debt burdens pose, particularly after recent volatility in the nation’s markets.

Modernland got creditor approval in late 2024 for its scheme of arrangement related to an exchange offer for its 2025 and 2027 notes.

The currently proposed restructuring for those securities due next year on Apr 30 would push their maturity to Jun 30, 2028.

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Under the proposal, holders would receive an upfront fee of US$50 for every US$1,000 of outstanding principal. The amended notes would accrue payment-in-kind interest at 3 per cent a year, while interest due before the restructuring becomes effective would be capitalised and added to principal.

The deal would also reshape the security package behind the bonds. Part of the existing collateral would be released, allowing Modernland and its group to pledge those assets to secure a new US$34 million facility.

The company said that the latest terms followed several weeks of discussions with holders of the existing notes and their advisers. The voting deadline for the scheme is 4:59 pm London time, or 11:59 pm Singapore time, on Aug 24. BLOOMBERG