Infrastructure: debt restructuring - Indonesia

Themes: Economic Growth | Environmental Sustainability | Private Sector Development

Guinness Gallagher fielded a team of legal, banking, forestry, engineering and marketing experts to undertake a business recovery and turnaround of a partially built US$500 million MDF Mill in Indralaya, South Sumatera, Indonesia.

The non-commissioned mill was only partially complete with significant further construction required to bring it into operation. However, the project was saddled with existing debt and equity in excess of its estimated capital value on completion of US$500, meaning that the existing equity and debt holders needed to recognize the loss in value to date before further investment for completion could be attracted in. This further significant investment would be required in order to complete the build, commission the plant and commence operations.

Our broad team of experts reviewed the status of the existing partially built plant, what it would take to become operational in terms of the completion of the plant and the sourcing of materials to supply an operating plant, and then assessed the potential income that the operational plant could generate to meet debt and shareholders' expectations, including: -

  • Costs to complete the plant;
  • Potential markets and sales; and
  • Access to supply inputs.

The review resulted in a series of theoretical operational models of the business given differing assumptions, which were then used by our banking and finance specialists to prepare business and debt restructuring plans to renegotiate agreements with suppliers, customers, banks and shareholders.

The themes and sectors covered by this project were as follows: -

Theme Sub-Theme
Economic Growth - Developing rural areas
  - Promoting economic efficiency and enabling business environment
  - Promoting macroeconomic stability
  - Widening access to markets and economic activities
Environmental Sustainability - Global and regional trans-boundary environmental Issues
Private Sector Development - Private sector investment
Sector Sub-Sector
Agriculture, natural resources, rural development - Agro-industry, marketing and trade
  - Forestry
  - Land-based natural resource management
Finance - Financial sector development
  - Infrastructure finance and investment funds
Transport - Multimodal logistics
  - Road transport (non-urban)