Waskita’s Bond Payment Miss Puts Indonesia Guarantee to Test Harry Suhartono Indonesian state-owned builder PT Waskita Karya was unable to repay 722 billion rupiah ($40 million) of bonds that fell due on Thursday, prompting a claim under an Indonesian government guarantee program that could test the country’s pandemic-era mechanism. The company said it’s unable to repay the principal on its 2021 Series A bond and has informed the guarantor and trustee PT Bank Mega, according to a stock-exchange filing late Wednesday. Bank Mega has submitted a guarantee claim to the guarantor that’s being processed, it said.

The bonds are covered by an unconditional and irrevocable government guarantee on principal, interest and late-payment penalties, according to the 2021 prospectus on the bond offering. The missed repayment appears to be the first involving a bond or sukuk covered by Indonesia’s guarantee program that began in 2020. It was designed to help companies hit by the Covid pandemic to raise financing and maintain their capacity to support Indonesia’s economic recovery.

Waskita had previously missed payments on other debt, but those securities weren’t covered by government guarantee. It adds to signs of financial strain among Indonesia’s state-owned builders, which accumulated large debts during former President Joko Widodo’s decade-long infrastructure drive. Cleaning up those companies has become one of the challenges facing current leader Prabowo Subianto’s sovereign wealth fund Danantara as it seeks to restructure troubled state assets while preserving capital for new investments.

The guarantee claim comes as Prabowo’s administration has reshaped government spending around flagship programs including its free meals and a nationwide network of village cooperatives. Prabowo said earlier this year that more than 300 trillion rupiah of budget savings had been redirected toward programs including free meals. For Waskita, the guarantee is provided by the Finance Ministry and PT Penjaminan Infrastruktur Indonesia — a state-run company that provides government-backed guarantees for infrastructure projects and programs — on behalf of the government.

The guarantors have 20 business days after the scheduled payment date to settle the claim, according to the filing. Waskita has separately set aside about 28.9 billion rupiah to cover interest payments on the Series A and Series B notes. Another state-controlled construction firm, PT PP, said this week that it won approval from bondholders to defer coupon payment of 11.1 billion rupiah due this week to 2027.

PP agreed this month to restructure about 18.2 trillion rupiah of debt owed to four state-controlled banks under a plan approved by Danantara so it can continue operating and repay creditors.