The Struggle for Survival – Economy
UNTIL Thursday evening April 29, Anne Patricia struggled with the digital transformation training material. Anne, Deputy Managing Director of Pan Brothers, attended a short course led by experts from renowned universities such as the Massachusetts Institute of Technology in the United States and Tsinghua University in China.
Pan Brothers is stepping up the digitization of its factory machines. This producer of textiles and clothing uses computerized automated systems. “We are industry 4.0 pioneers. We have to be able to do it, and the next step is to be the pioneer of 5.0, ”said Anne. Tempo that night.
This year, Pan Brothers allocated US $ 10 million, or Rs.140.5 billion, for automation, digitization and the addition of machinery for business expansion. Anne added that the application of Industry 4.0 aims to increase productivity. Efficiency would also be underway without having to execute massive shots, which has happened in most industries that are under pressure during the Covid-19 pandemic.
Until Saturday May 1, PBRX – the code for Pan Brothers on the Indonesian Stock Exchange – has yet to release its 2020 annual report. However, in September 2020, the company reported profits of US $ 18.3 million. , or 265.6 billion rupees, up 9% from the same period in 2019.
However, this positive achievement does not necessarily guarantee harmonious relations with the banks. Credit flows to Pan Brothers have been slow. Bilateral working capital facilities, Anne said, have declined. “The total installations of US $ 250 million continued to be reduced to US $ 70 million. Can you imagine? ”She said.
That was not all. One of the big banks – Anne refused to disclose the name – has frozen its lending facilities, highlighting the market stagnation due to the pandemic. “I told them that macroeconomic demand had declined. On the micro side, Pan Brothers has not suffered a decline, ”she said. “We are socially and environmentally compliant, which is why a lot of the demand has shifted to us from other countries. We have received quite a few.
This drop in credit limits shook the company’s finances. PBRX has made efforts, including refinancing, to cover its long-term debts of US $ 133 million, or roughly Rs.1900 billion, which were due on February 1.
Signed on October 9, 2015, this credit agreement involved seven foreign banks, with Bank ANZ Indonesia as lead arranger and bookrunner, Hongkong and Shanghai Banking Corporation Limited (HSBC) as facility agent and Bank UOB Indonesia as a security guard. In addition to these three banks, the syndication included Bank CIMB Niaga, Citibank NA, Standard Chartered Bank and Bank Maybank Indonesia.
Initially, the syndicated loan limit was US $ 270 million. However, on September 27, 2017, the deal was revised, lowering the cap to US $ 110 million with an accordion of US $ 40 million. But in November 2018, the company only received additional loans of US $ 28.5 million, raising the cap to US $ 138.5 million.
PBRX also issued a global note worth US $ 200 million on January 26, 2017. This bond enjoyed strong demand, securing US $ 800 million from 106 investors. Listed on the Singapore Stock Exchange, the bond with an annual interest rate of 7.625% with a maturity date of January 26, 2022, was used to pay off short-term debts and finance the expansion.
These two major debts due in February 2021 and January 2022 have caused concern among creditors. In early February, PBRX secured a standstill agreement for two weeks: January 27 to February 12. This condition led Fitch Rating to downgrade the company’s debt rating from CC to C, reflecting its potential for early default. Fitch felt the lengthy negotiations and short standstill period reflected the company’s tight liquidity. Fitch believed that resolving the company’s capital structure could only be done through restructuring.
Pan Brothers management actually received approval at its extraordinary general meeting of shareholders on January 26 to issue a US $ 350 million global note. This global bond is listed on the Singapore Stock Exchange and is due for repayment in 2026. The funds will be used to repay debts of the company and subsidiaries valued at US $ 171.08 million, due January 2022, and refinance syndicated debt of US $ 138.5 million. The remaining amount will be used for working capital.
However, refinancing negotiations are ongoing until a new agreement can be reached with the syndicated banks. Pan Brothers submitted an extension request from January 2021 to January 2023. “It’s almost granted. I reported this to the Financial Services Authority (OJK) for protection, ”Anne said.
Teguh Supangkat, OJK’s deputy commissioner for banking supervision, said his institution was regulating funding during the time of the pandemic. These regulations are summarized in OJK regulation n ° 11 / POJK.03 / 2020 concerning the revival of the national economy to counter the impact of the Covid-19 pandemic, renewed by OJK regulation n ° 48/2020. On March 29, the OJK also sent letters to Sharia banks as a guide for the banking sector to implement these regulations.
Teguh said these regulations are aimed at helping the real sector, so it can keep moving forward during the pandemic. “Also to help the banks,” Teguh said on April 30.
The Ministry of Industry feared that there was negative stigma in the banking sector vis-à-vis the textile and textile products industries, seen as declining industries. Muhammad Khayam, director general of the ministry for chemical, pharmaceutical and textile industries, said the facts proved otherwise. So far, he said, the performance of the textile industry has been reasonable, despite the pandemic. “This sector is still a source of jobs and foreign exchange reserves.”
Unlike the major players, medium and small-sized textile companies barely survived amid falling demand due to a weaker economy and the pandemic. For most factories in Majalaya, Bandung Regency, West Java, the opening and closing of operations has become a regular occurrence, when in fact in the past this sarong center had always been very busy with customers. , especially during and at the end of the Ramadan month of fasting.
Agus Ruslan, director of Citra Sandang Textile (Cisatex), now also markets sarongs. Cisatex is actually a textile factory, but very low demand has prevented its factory from operating on a daily basis. At first, Agus was able to sell up to 500 kodis (1 kodi = 20 pieces) of sarongs per day. “It fits in one vehicle. Today it is only five to ten kodis, which can be delivered by motorcycle taxis, ”he said.
For the past three weeks, Cisatex’s machines have remained silent. Agus was unable to exploit them because the company only received orders for 50,000 meters of fabric, about half of the plant’s capacity.
For Agus, these conditions pose a plethora of dilemmas. If orders are taken now, they will not be included in trade calculations. Besides the high operational costs, the company also has to pay Ramadan bonuses to its employees. This is why he chose to postpone production after Ramadan.
Agus further stated that Cisatex has gone through periods of zero demand. At that time, a few months after the start of the pandemic, the factory was at a standstill. The company was unable to pay for the electricity, which resulted in the power outage of the public electricity company PLN. It was reconnected after Agus again received orders and used the money to pay his energy bill.
Agus, who is also vice-president of the Majalaya Small and Medium-Sized Textile and Textile Products Association, questioned a number of state aid programs for small and medium-sized enterprises, which have been widely reported in the media. He stressed that nothing has reached the small industries of Majalaya. He said he brought together a group of entrepreneurs to submit a proposal to the Ministry of Cooperatives and Small and Medium Enterprises. “We haven’t received any response so far,” Agus said.
According to Muhammad Khayam, the Ministry of Industry is working to protect the domestic market. The securing of the textile and textile products industries is achieved thanks to market demand which, in recent years, has been faced with strong competition from imports. Possible options in the preparations are instruments for safeguarding trade and controlling import trade systems.