Published 31 October 2024, 13:10

Indonesian textile company Pan Brothers has proposed to exchange its US dollar bonds for mandatory convertible bonds as part of a debt restructuring.

The company listed the main terms of the proposal in a filing to the Singapore stock exchange on Tuesday, under which all of its US$171.078m 7.625% December 2025 notes would be converted to the mandatory CBs, which would have a 1% interest and 15-year tenor.

The note is the company's only outstanding bond, according to LSEG data. Lucror Analytics analysts wrote in a note on Thursday that they estimated a recovery value of the notes of nine cents.

The bonds last traded at 15, LSEG data show.

Pan Brothers will also exchange its defaulted syndicated loan and bilateral loans into a combination of term loans, credit lines, mandatory CBs and an asset settlement. Its syndicated loan will be exchanged for two tranches: Tranche 1 has tenors between 11 and 15 years with "low interest during the first initial years" and the principal repayment starts at year six, while Tranche 2 has tenors of 15–20 years and 1% interest.

Its non-active bilateral lenders will receive a term loan with the same terms as Tranche 1 and mandatory CBs as bondholders. The lender of certain defaulted bilateral loans can choose between the reactivation of a US$14m committed facility with a tenor of seven years, or a conversion to a term loan and mandatory CBs as non-active bilateral lenders.

Another defaulted bilateral loan will be settled through an asset settlement of the loan collateral.

Details of the restructuring were not disclosed in a company filing to the Singapore stock exchange. AJ Capital Advisory is the financial adviser.

Pan Brothers first defaulted in 2021 after it failed to extend a US$138.5m syndicated revolving credit facility due in January 2021, which resulted in missed payments under its banking facilities and a default of a US$171m 7.625% 2022 bond. The company completed a restructuring later that year to extend the bond maturity by four years and the RCF by up to two years.

In September 2023, the company missed the payment on an amortisation payment of US$5m on its syndicated facility again, and then failed to make a coupon payment on the dollar bond this January.

In June, Pan Brothers obtained a temporary suspension of debt payment obligations (PKPU) until November 22 2024 from the Jakarta commercial court. A PKPU is a restructuring process in Indonesia that provides a debtor with more time to come up with a composition plan to restructure its debt, which would be sanctioned by a court.