Loans Stagnant In US Dollars 450 Million To CIMB Niaga Syndicate, Bank Mandiri, Etc., Titan Infra Energi Even Build Roads

Illustration. (Photo: Doc. Antara)

JAKARTA - The price of coal that continues to creep up has forced a number of companies engaged in this sector to aggressively expand. One of them is PT Titan Infra Energi, a coal mining company in South Sumatra, which will build a 30-kilometer hauling road, aka a special toll road for coal transportation.

Based on recent media reports, Operational Director of PT Titan Infra Energy Suryo Suwignjo stated that the construction of the new hauling road is to connect the existing line to its coal mine site.

Currently, the Titan Group subsidiary operates a 113-kilometer hauling line, covering three regencies, namely Lahat, Muara Enim and Pali. The road infrastructure development plan carried out by Titan reflects the condition of the coal mining company's cash flow in a healthy condition and the company's operations running normally.

However, on the other hand, since two years ago, until now Titan has reportedly not paid any of its credit installments worth US$450 million to creditors. This was confirmed by CIMB Niaga's Compliance Director Fransiska Oei in her information disclosure letter to the stock exchange authority last week.

Fransiska stated that the syndicated loan given to Titan had bad credit status. However, the company's operational and production activities are still running normally.

The non-performing loan dispute began in 2018, when a syndicated financial institution consisting of: Bank CIMB Niaga, Bank Mandiri, Credit Suisse and Trafigura disbursed loans worth US$450 million to the Titan Group. The purpose of the credit is for the construction of a toll road (hauling road) as access from the mine to the port.

This road is also used by other mining companies and the general public by paying toll fees to Titan. In addition, part of the credit is used for the company's working capital.

The syndicated banks designed the credit to be repaid in installments using the assumption that the price of coal on the international market at that time was US$40 per tonne. In fact, the price of coal continues to increase rapidly.

In 2019, the average price of coal was US$67 per tonne; increase again in 2020 by 78 US dollars per tonne; and in 2021 it will reach 165 US dollars per tonne; even in June 2022 it touched 400 US dollars per tonne, or an increase of 10 times from the initial assumption, when credit was extended to Titan.

Based on some of the data above, Titan should be able to pay its installments, even including speeding up credit repayments. However, the opposite happened, in February 2020, Titan began not paying its credit installments. Until finally in August 2020, the credit to the company had a collectability status of 5, aka bad.

Due to the lack of clarity on the settlement scheme for Titan's obligations to creditors, the syndicated participating banks agreed, assessing that the debtor was indicated to be 'naughty'. This is because the company's operations are running smoothly, the price of coal continues to increase, but management does not want to pay the debt.

Reports from independent agencies Deloitte and Borelli Walsh/Kroll, which conducted financial audits of Titan confirm this. The two institutions conveyed the potential for non-compliance with the Cash Account Management Agreement (CAMA) carried out by Titan's management. This non-compliance resulted in the absence of funds that should have been used to fulfill Titan's credit obligations to syndicated creditors.

Due to the lack of goodwill from Titan's management, the syndicated banks finally complained about the matter to the Police, with the offense of alleged criminal acts of embezzlement and money laundering. Because, Titan did not comply with the agreement, by not depositing funds into a holding account for installment payments, and instead deposited them into another account.

Responding to the disclosure of information submitted by creditors to the stock exchange authorities regarding Titan's bad credit, President Director of PT Titan Infra Energy Darwan Siregar said he would reopen communication with creditors, including Bank Mandiri. He hopes to return to discussing Titan's credit restructuring.

"We will immediately return to Bank Mandiri. As customers, we hope that communication can run better," said Darwan, as quoted by a number of media, last Friday.

According to Kiswoyo Adi Joe, Head of Investment at PT Reswara Gian Investa, it is normal for creditors to report to law enforcement officials about criminal acts committed by debtors in an effort to restructure credit. This is an effort by banks and financial institutions to prevent potential losses from getting worse due to the debtor's uncooperative attitude.

As a practitioner of the financial sector and capital market, Kiswoyo emphasized that it would be unreasonable to say that the debtor's business activities and operations continue to run normally, but the company admits that it is unable to fulfill its obligations to creditors.

"The restructuring of bad debts takes various forms. Starting from extending the tenor, reducing the value of fines, cutting interest rates, helping find new investors, to reporting to law enforcement if it is proven that there has been a violation by the debtor," said Kiswoyo, in a statement, Monday. 27 June.

In order not to drag on and get worse, Kiswoyo suggested that all relevant parties, including regulators, could sit down together to resolve the issue. The goal is that the government's economic recovery efforts after the COVID-19 pandemic will not be disrupted by bad loans whose value is very large.