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Assets Sales Scheme Solution For Companies undergoing Penundaan Kewajiban Pembayaran Utang (PKPU) Process

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The purpose of Suspension of Debt Payment Obligation (Penundaan Kewajiban Pembayaran Utang or “PKPU”) is to provide a solution related to repayment problems between debtors and creditors. However, if a reconciliation plan is not achieved, or the court rejects the reconciliation plan, then the court is obliged to declare the debtor bankrupt. This article briefly explores the current situation related to PKPU in Indonesia.

In 2021, there was an increase in PKPU cases compared to 2020. The Chairman of the Advisory Board of the Indonesian Association of Curators and Administrators (AKPI), Jamaslin James Purba, said in the news that more companies were having difficulty paying their debt obligations on time.

One of the reasons for the increase was the impact of the pandemic. Many business activities declined, and many businesses experienced difficulty in collecting revenue, while still having to pay fixed obligations. As the pandemic and economic slowdown continued, debtors were unable to collect revenues, which led to failures in repaying creditors.

As stipulated in PKPU and bankruptcy regulations in Law Number 37 of 2004, abbreviated as UUK 2004 in Article 222 paragraph (2), a debtor who cannot pay his debts, or expects to be able to continue paying debts that are already due and collectible, may request a postponement of the obligation to pay debts. 
 
PKPU Period

The PKPU application can be submitted before or after the bankruptcy application. However, the PKPU application should be submitted no later than during the first hearing of the examination of the petition for a declaration of bankruptcy. If the bankruptcy petition and PKPU are filed at the same time, then the PKPU petition will be examined first.

When a PKPU application is granted, there is a maximum temporary PKPU period of 45 days from the date the temporary PKPU is granted. This period can be extended to a permanent PKPU of up to a maximum 270 days from the date the temporary PKPU is granted. During the temporary and permanent PKPU periods, a debtor can present and negotiate a composition plan with their creditors, the success of which determines whether the debtor goes into bankruptcy. If the creditors do not agree to the composition plan offered by the debtor during the period of the PKPU, the court will declare the debtor bankrupt.

The preparation of the right composition plan is an important effort that can be made by debtors in order to escape the storm of bankruptcy.

Assets sales and assets disposal scheme as the solution to generate cash

To ensure that the debtor has the right composition plan, it is necessary to prepare a suitable solution that it is reasonable and can be accepted by creditors. Usually a third-party financial consultant will be needed to help the company calculate the financial plan, make assessments and assist in preparing the plan. When the financial consultant, who is directly dealing with the creditors and debtors, identifies the source from which funds can be generated, the next step is execution.

Every company should have assets that can be used as a source of funds when sold. When the financial consultant does the calculations, assets such as property are usually included in the plan because they are considered to have a sales value that can cover debt repayment(s). This is why the role of a property consultant is also important. Together with the financial consultant, they create synergies to execute the agreed upon divestment plan.

One of the solutions to generating funds to pay off debt in the PKPU process is an asset sales scheme. In selling assets, it is necessary to pay attention to establishing attractive sale prices, so the assets can generate interest and be sold quickly with the funds used for debt payments.

To determine the sales value of assets, a valuation report is needed so that prospective buyers can buy the assets offered at a fair price. In particular, when large assets such as property are to be sold, a professional valuation with long-term projected value calculations is required.

The property selected for sale by the financial consultant is considered capable of providing benefits to the debtor and creditor. However, finding suitable buyers or investors in this type of situation requires experts who understand the market conditions, have good knowledge of property conditions and have extensive connections to be able to sell these assets within the specified timeframe based on PKPU regulations.

Asset disposal can be a solution if the property is priced fairly and, based on the valuation report, is attractive enough for prospective buyers to purchase. From an investor's point of view, the investment needs to be worth it and profitable to their future business investment portfolio.

Opportunity

• For the borrower in PKPU process.
Even though the borrower is subject to the PKPU process, if the large assets offered are sought-after properties in the market, such as hotels or malls, this, combined with attractive and competitive prices, will usually attract potential buyers or investors quite quickly, especially if the property(s) offered aligns with their type of business. If the property is sold and there is money left over after paying off the debts, the debtor can retain the remaining funds as business capital.

• Potential buyer or investor
For potential buyers or investors, when a property offered is subject to the PKPU process, it can be a good opportunity to buy a large asset at a price lower than the normal market price. While most potential buyers and investors are cautious and analytical in choosing investment properties, there can be very attractive benefits in PKPU process-related investments.

Click here to learn more and see what could be in the future of property investment including how you can accelerate your business success or contact our Capital Markets & Investment Services experts for a discussion.

Article References:

Kontan.co.id
Bisnis.com
SSEK.com


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