INDONESIA Law and Practice Contributed by: Maria Sagrado, Frederick Simanjuntak and Stephanie Kandou, Makarim & Taira S.
7.5 Risk Areas for Lenders Lenders face the risk of not receiving full repayment of the debt or loan, especially if no security is in place. Unsecured creditors are the lowest priority in the repayment hierarchy and usually only receive a pro- rated amount in bankruptcy proceedings.
existing debts through a composition or restructuring plan. If unsuccessful, the debtor is declared insolvent, and the receiver will manage and sell the bankruptcy assets to settle verified claims. The entire process often takes significant time, mainly due to the effort required to sell the bankruptcy assets for repayment. Depending on the volume of assets and claims, the process can take up to a year or more. Creditor recoveries depend on whether the bankrupt debtor has sufficient assets to settle verified claims. However, in most cases, the debtor’s assets are insuf- ficient, resulting in partial or no payment for claims, particularly for unsecured creditors, who typically receive prorated distributions. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency Aside from bankruptcy proceedings, the main for- mal debt restructuring process in Indonesia, with court involvement, is the delay of payment procedure ( Penundaan Kewajiban Pembayaran Utang – PKPU). PKPU is a debt restructuring process (involving the commercial court) for debtors requiring more time to repay or restructure debts, as opposed to bankruptcy, which applies to debtors unable to repay or who are insolvent. Once the commercial court places a debtor under PKPU, the debtor retains its rights but is subject to prior approval and supervision by the appointed administrator and supervisory judge. Initially, the court issues a temporary PKPU ruling for up to 45 days and appoints an administrator and supervisory judge. Dur- ing this period, the debtor may propose a restructur- ing (composition) plan for approval by the secured and unsecured creditors. If the plan is rejected, the debtor is automatically declared bankrupt. At the debtor’s request, secured and unsecured creditors may also approve a permanent PKPU, extending the PKPU period for up to 270 days, inclusive of the temporary PKPU period. In addition to the court-supervised process, consen- sual out-of-court restructuring arrangements are also available. Where the restructuring involves specific creditors, the company may negotiate and execute restructuring agreements with the relevant parties.
8. Project Finance 8.1 Recent Project Finance Activity
With the Indonesian government placing considerable emphasis on power and infrastructure, power plants remain one of the country’s most active sectors for project finance. Furthermore, the government’s intro- duction of incentives for the electric vehicle (EV) indus- try in Indonesia has begun to yield results, attracting foreign investment in EV-related industries. Conse- quently, project financing for EV-related sectors, such as nickel mining and processing, has also become increasingly active in Indonesia. 8.2 Public-Private Partnership Transactions Public–private partnerships (PPPs) in infrastructure are mainly governed by Presidential Regulation No 38 of 2015 (“PR 38/2015”) and its implementing regu- lation, National Development Agency Regulation No 7 of 2023 on the Implementation of Public–Private Partnership Schemes for the Procurement of Infra- structure (“Reg 7/2023”). Under Reg 7/2023, infrastructure eligible for develop- ment through PPPs includes: • transportation infrastructure; • road infrastructure; • water resources and irrigation infrastructure; • drinking water infrastructure; • central wastewater management infrastructure; • local wastewater management infrastructure; • waste and/or hazardous and toxic waste manage- ment systems; • telecommunication and informatics infrastructure; • electricity infrastructure; • oil and gas, as well as renewable energy (including bioenergy) infrastructure;
• energy conservation infrastructure; • urban facility economic infrastructure;
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