📚 Acrostics Anatomy: Pan Brothers’ Receding Rope
The Indonesian textile company is running out of options after completing two debt restructurings.
📒 Quick Take: Indonesia’s Textile Tangle (30 August 2024)
📒 Quick Take: Pan Brothers Takes Off Its Gloves (26 October 2024)
📒 Quick Take: Diverging Textile Strands (20 December 2024)
📸 Snapshot: Pan Brothers 1Q25 Results (7 May 2025)
📒 Quick Take: Indonesia’s Restructuring Fault Lines (13 May 2025)
📸 Snapshot: Pan Brothers 9M25 Results (3 November 2025)
📒 Quick Take: Indonesia’s Textile Tangle
30 August 2024
Why the Indonesian government’s restrictions on Chinese textile imports are not addressing the crux of the problem.
Pan Brothers entered a local in-court restructuring (PKPU) around two years after its debt deal.
Buried among the news out of Indonesia this week was the government’s plan to move textile import points to the east.
The Industry Ministry is finalizing a proposal to relocate entry points for imports, including textiles, from Java to West Papua, North Sulawesi or East Nusa Tenggara, according to the Jakarta Post.
From 9 August, the Finance Ministry also reimposed additional tariffs on fabric imports to protect the local industry from the influx of cheaper goods, mainly from China, Bloomberg reported.
The Indonesian government probably had to do something after reports of mass layoffs in the domestic textile sector, but a key challenge that has yet to be addressed is the decline in working capital loans.
Pan Brothers entered a local in-court restructuring (PKPU) around two years after its pre-packaged scheme of arrangement was sanctioned in Singapore. Back then, the deal extended its offshore bonds by four years and syndicated loan by two years, but didn’t resolve its underlying weakness.
Pan Brothers struggled with a lengthening cash conversion cycle, meaning that customers took longer to pay up while suppliers wanted to be paid faster. That was fine when Pan Brothers could get credit to help cover the gap, but a bunch of banks retreated from the textile sector after the distress of Duniatex and Sritex.
A restructuring friend opined that Pan Brothers should have rolled over its syndicated loan by up to five years, but the reality is that getting the “1+1” extension was already like pulling teeth (the company had to fend off both a PKPU petition and a bankruptcy application by Maybank Indonesia before the 2022 deal).
At the time, Pan Brothers’ creditors chose to kick the can down the road because 1) The key shareholders agreed to inject USD 50 million into the company, 2) They were hoping that business would improve and/or Pan Brothers would find new lenders, 3) The company emphasized the support of its key customer Adidas, and 4) Pan Brothers’ boss Anne Patricia Sutanto didn’t go into hiding.
However, Pan Brothers couldn’t pay the USD 124 million syndicated loan that fell due in December 2023. The company only had around USD 20.7 million of cash as of 1Q24, which included USD 6.5 million in its bond interest reserve account that was then released to settle an outstanding coupon, according to Fitch.
Pan Brothers and its units entered PKPU on 11 June at the request of a logistics provider and the process was extended until 22 November to verify claims (as an aside, colourful Indonesian lawyer Hotman Paris’ team posted on Instagram that they were hard at work registering the claims of an undisclosed client).
The company has assembled an alliance of restructuring veterans: Geoff Simms’ AJCapital Advisory (which advised Duniatex and Sritex), Nicky Tan’s nTan Corporate Advisory (Tan handled Hyflux and Asia Pulp & Paper), and Aji Wijaya & Co (the long-time counsel of Bakrie Group).
A friend close to Pan Brothers’ creditors said there was “no info flow after months” and they are worried the restructuring will turn into “Sritex 2.0”. Around USD 700 million in off-balance-sheet debt – mainly related party loans – emerged during Sritex’s PKPU in 2021 and the company eventually pushed through a deal.
Whether Pan Brothers will carve its own path or take the road others have travelled will be clear when it presents its new restructuring proposal.
📒 Quick Take: Pan Brothers Takes Off Its Gloves
26 October 2024
Pan Brothers is proposing a debt-to-equity swap and a back-loaded loan repayment in its latest restructuring.
A state-backed loan guarantee scheme to help businesses recover from the pandemic has failed to lift the textile sector.
Indonesian clothing maker Sri Rejeki Isman (Sritex)’s bankruptcy has dominated headlines this week, but its textile peer Pan Brothers is also fighting for survival.
Like Sritex, Pan Brothers was back in distress around two years after sewing a restructuring deal with creditors. The difference is Sritex was declared bankrupt as it defaulted on its earlier Indonesian in-court restructuring (PKPU) agreement, while Pan Brothers is undergoing PKPU following a Singapore scheme of arrangement.
In August, I wrote “whether Pan Brothers will carve its own path or take the road others have travelled will be clear when it presents its new restructuring proposal.”
We have the answer now, with Bloomberg reporting that the company has circulated a restructuring plan to slash its debt by around 57% to USD 140 million, a level considered sustainable based on a 15-year projection.
In short, Pan Brothers is not pulling its punches anymore. The company is proposing a debt-to-equity swap for offshore bondholders and some bilateral lenders, as well as a back-loaded syndicated loan settlement with minimal payments in the first five to six years. This compares with its 2022 restructuring that extended its offshore bonds by four years and syndicated loan by two years with no outright haircut.
How did Pan Brothers end up in this situation when its Singapore scheme of arrangement was previously heralded as one of a few successful restructurings for Indonesian borrowers? A bunch of media blame the entire textile industry’s malaise on Chinese imports, but this is lackadaisical reporting.
Yes, the influx of Chinese goods did make life difficult for Indonesian textile companies that cater to the domestic market. But Pan Brothers described itself as export-oriented, with most of its products reaching destinations such as the US, Europe, Asia, Canada, Australia and New Zealand. Exports accounted for around 94% of Pan’s total sales in 2023, according to Fitch.
The rarely spoken truth is that banks have been avoiding the textile sector. Working capital loans helped to fill the cash conversion gap of these companies and therefore functioned like their lifeblood. So when the loans dried up, operations risked grinding to a halt as customers weren’t paying fast enough for the manufacturers to, in turn, pay suppliers.
In contrast to the gloomy picture for textiles, total loans to the mining and quarrying industry jumped 33% from a year earlier to IDR 302 trillion (USD 19.2 billion) as of July 2024, local media reported, citing Bank Indonesia data. Working capital loans for miners surged 50.6% to IDR 164.7 trillion while investment credit grew 17% to IDR 137.5 trillion.
This is not surprising as Indonesia’s commodities or resources sector is pretty hot right now. On the other hand, it’d take a very brave banker to even suggest to his or her credit committee that they should lend to a textile company after the defaults of high-profile trio Pan, Sritex and Duniatex.
State-owned banks might have more incentive to do national service and support the labour-intensive textile industry. In fact, Pan Brothers was pinning its hope on a loan guarantee scheme that was rolled out by the government in 2020 to help businesses recover from the pandemic.
Under the program, state-owned institutions Indonesia Eximbank (LPEI) and Indonesia Infrastructure Guarantee Fund (PII) were supposed to guarantee working capital loans to companies that were affected by the pandemic and engaged in export-oriented and/or labour-intensive activities.
Perhaps it’s hard to rescue others when one’s own house is on fire. Indonesia Eximbank’s gross non-performing loan (NPL) ratio reportedly hit a whopping 43.5% at end-2023 mainly due to “overfinancing” to borrowers that lacked the means to repay their debt. The current predicament of textile companies such as Pan Brothers indicates that the state-backed loan scheme has failed to lift the sector.
While Pan Brothers’ latest restructuring proposal is designed to ease its debt load, it still needs to generate enough cashflow to service its debt. Sritex’s bankruptcy is a cautionary tale on the dangers of defaulting on a PKPU agreement down the road.
📒 Quick Take: Diverging Textile Strands
20 December 2024
Sritex’s appeal against its bankruptcy was rejected by Indonesia’s Supreme Court.
Pan Brothers got a reprieve after most creditors approved its PKPU proposal at the behest of the Indonesian government.
Indonesian textile company Sri Rejeki Isman (Sritex) is nearing the end of the road, while its peer Pan Brothers lives to see another day.
On Wednesday (18 December 2024), the Supreme Court rejected Sritex’s appeal and upheld the bankruptcy ruling of the Semarang Commercial Court. While the news might be upsetting for Sritex’s workers, as I wrote two months ago there was little legal basis for the Supreme Court to overturn the lower court’s decision.
Sritex failed to pay one of its suppliers in accordance with its local in-court restructuring (PKPU) agreement, so this trade creditor’s petition to cancel the deal and declare Sritex bankrupt was granted by the court.
Even though Sritex kept pointing out that the supplier accounted for a fraction of its total debt, the question is simple: Did it pay the creditor or not? If not, then even the best lawyers wouldn’t have much room to manoeuvre.
While there was a past case of an appeal being accepted on the grounds of humanitarian or public interest, such a move might be difficult to justify in Sritex’s case. The judges may also not want to open a Pandora’s Box containing questions on which other borrowers should be allowed to escape from bankruptcy.
Sritex still has the option of applying for a judicial review (peninjauan kembali), but the company is bleeding by the day while having to prevent mass layoffs as directed by the government. Sritex’s bank accounts were frozen by the court-appointed administrators handling its liquidation and its raw materials were gradually running out.
Even though President Prabowo Subianto ordered his ministers to rescue Sritex’s workers, the reality is their hands are tied and bailing out the company is not an option.
The government already had to roll out fiscal incentives to soothe the public over an upcoming value-added tax hike. Nationalizing Sritex is also not feasible considering that state-owned garment manufacturer Primissima is in its own financial trouble and had to lay off workers earlier this year.
What’s next for Sritex’s lenders?
It seems that offshore bondholders are still pursuing some recovery from Sritex’s liquidation as they had appointed a local counsel to file their claims to the administrators. The bond trustee reportedly told the noteholders only four days before the deadline that it was not responsible for registering their claims and that it was not monitoring the developments.
It’s uncertain if foreign creditors will get any money back. As I wrote before, an independent auditor that was appointed during Sritex’s PKPU process in 2021 impaired 64.7% of the reported inventories totalling USD 710.6 million. It also made an allowance for impairment losses that represented 55% of Sritex’s total receivables of USD 222.7 million.
A banker friend said that an option for Sritex’s private creditors is to investigate whether their money was used for its intended purpose or channelled elsewhere. But this friend acknowledged that the lenders are “already under pressure on the write-off, let alone to fork up additional expense for an expensive investigative audit.”
While the use of third-party litigation funding is well-established in jurisdictions such as the US, UK and Australia, it is “only in an embryonic stage in Asian jurisdictions”, according to a 2018 article written by WongPartnership lawyers. A restructuring friend said that litigation funders may not want to touch Sritex as the company is bankrupt and pursuing the people involved could be an uphill task.
Turning to Pan Brothers, it managed to get a reprieve after more than 90% of its creditors approved its latest restructuring proposal on Wednesday.
This came after Coordinating Minister for Economic Affairs Airlangga Hartarto summoned Pan Brothers’ management and key creditor SC Lowy’s chief investment officer to a meeting on 5 December, Bloomberg reported. Hartarto reportedly said that the government didn’t want to see job losses and would not bail Pan Brothers out if it went bankrupt.
The government could still intervene in Pan Brothers’ case because it was going through an Indonesian restructuring after previously completing a Singapore scheme of arrangement, whereas Sritex defaulted on its PKPU agreement and Indonesian law allowed its creditor to file it into bankruptcy. In short, Pan Brothers still had a second shot while Sritex ran out of chances.
Under Pan Brothers’ revised proposal, bondholders were given an additional option to swap their existing 7.625% notes into new ones with a 15-year tenor and 1% annual interest, Bloomberg reported.
It’s hard to imagine any creditor being happy with this “option”, but they probably decided that it wasn’t worth being blacklisted by the Indonesian government over a single credit.
While Pan Brothers’ path may have diverged from Sritex for now, it must find a way to avoid falling off the cliff later on.
📸 Snapshot: Pan Brothers 1Q25 Results
7 May 2025
Indonesian textile company Pan Brothers has released its results for the three months ended 31 March 2025. These are some of the highlights.
👖 Cost cuts couldn’t offset sales decline: Revenue plunged 43.9% to USD 51.8 million from a year earlier as exports and domestic sales both tanked. The company suppressed the cost of goods sold to USD 47.7 million from USD 81.4 million mainly by using less materials, but it still posted a USD 1.9 million operating loss because it could not offset the weakness in its topline.
👖 Cash is running low to service debt: Cash receipt from customers fell to USD 53.6 million from USD 83.1 million a year earlier. The company slashed payments to suppliers and paid out less interest, but only slightly reduced payments to employees. Net operating cash outflow widened to USD 8.5 million from USD 5.6 million, contributing to a 56.8% drop in cash and equivalents to USD 9 million as of end-March. Total liabilities stood at USD 127.8 million, out of which USD 41.7 million was due in the short term.
👖 Restructuring 3.0 will be challenging: Pan Brothers could be headed for a third debt restructuring as a sales recovery looks elusive amid the US tariff hike and slump in demand. The company already went through a court-supervised restructuring (PKPU) in Indonesia last year and may run into a similar challenge faced by its peer, Sri Rejeki Isman (Sritex), which was declared bankrupt by a local court. One of Sritex’s suppliers filed it into bankruptcy after it defaulted on its PKPU agreement, underscoring the risk to Pan Brothers.
📒 Quick Take: Indonesia’s Restructuring Fault Lines
13 May 2025
The potential options are to restructure the debt one by one, protect the key units, or start a new company.
All three options are unpalatable for flag airline Garuda Indonesia, so officials might be tempted to throw just enough cash at the problem.
The fault lines in Indonesia’s restructuring framework have been laid bare as more companies are at risk of re-defaulting on their earlier debt deals.
On the macro front, I flagged that President Prabowo Subianto’s “Golden Indonesia” vision is increasingly diverging from reality, as the accelerating layoffs are forcing Indonesians to tighten their belts. Private investments are also hamstrung by a lack of security, as some businesses were held hostage by thugs masquerading as civic organizations.
A growing number of companies must restructure their debt again even after undergoing a court-supervised restructuring (PKPU). I wrote that Pan Brothers may have to restructure for the third time due to a collapse in textile demand, while Garuda Indonesia could be headed for a fourth one as the flag airline grapples with maintenance costs and an airfare cap imposed by the government.
The first fault line is that PKPU is like a last chance saloon where borrowers have one shot at an in-court restructuring and could be filed into bankruptcy if they re-default, as shown by the demise of Pan Brothers’ peer Sri Rejeki Isman (Sritex) and shipping company Arpeni Pratama Ocean Line).
The second fault line is that a PKPU deal only binds the entities that went through the process, meaning that the subsidiaries that were left out are still exposed to creditor action. Garuda completed PKPU in 2022, but a trade creditor could still file a PKPU petition against its travel system unit, Aero Systems Indonesia, which was granted by a local court last month.
The third fault line is that even if the company pursues another restructuring in a foreign jurisdiction, such as Singapore, the deal may not be recognized in Indonesia. In short, a borrower and its advisers may go through the whole dance with creditors overseas only to find out that a local supplier can turn off the light back home.
Given these fault lines, there are three potential options:
Restructure the debt one by one
Protect the key units
Start a new company
The first option is a huge undertaking for a borrower and its advisers, as they will have to leave no stone unturned and negotiate bilateral deals with each of the creditors.
The second option is worth considering if there are certain subsidiaries that are important enough and vulnerable to creditor action. Out of 15 grounded planes, Garuda’s unlisted budget unit Citilink accounts for 14 while the remainder is under the flag carrier. In short, Citilink is in an even deeper quagmire than its parent and could be the top candidate for a moratorium.
Lion Air’s founders used the third option and set up Super Air Jet, but I wrote that it’ll be harder for Garuda – as a publicly listed state-owned enterprise – to follow this playbook. As for Pan Brothers, even if its management were to start a new entity (Pan Sisters?), some creditors may put up a fight and it’s uncertain how long the new company can last without working capital.
All three options are unpalatable for Garuda, so officials might be tempted to throw just enough cash at the problem and pray that it’ll resurface later rather than sooner. I wrote on 24 April that a direct capital injection from the government would be a tough sell in this economic climate, so rescuing Garuda via new sovereign fund Danantara could be a workaround.
Given that raising fresh funds from investors will likely invite questions, Danantara may pool the dividends it receives from SOEs and transfer the money to Garuda through a shareholder loan. However, if the underlying tumour is not fixed, Garuda should be back in hospital a few years down the road.
📸 Snapshot: Pan Brothers 9M25 Results
3 November 2025
Indonesian textile company Pan Brothers has released its results for the nine months ended 30 September 2025. These are some of the highlights.
👕 𝗘𝘅𝗽𝗼𝗿𝘁𝘀 𝗱𝗿𝗮𝗴 𝗱𝗼𝘄𝗻 𝘀𝗮𝗹𝗲𝘀: Pan Brothers reported a nearly 18% drop in revenue to USD 202.3 million from a year earlier, as the decline in exports outpaced the increase in its domestic sales. The company cut the cost of goods sold to USD 184.6 million from USD 225.8 million by reducing the purchase of raw materials and other production costs. However, this failed to prevent a swing to an operating loss of USD 88,030 from an operating profit of USD 419,614 a year earlier.
👕 𝗜𝗺𝗽𝗮𝗶𝗿𝗲𝗱 𝗿𝗮𝘄 𝗺𝗮𝘁𝗲𝗿𝗶𝗮𝗹 𝗮𝗱𝘃𝗮𝗻𝗰𝗲𝘀: Despite its operating loss, Pan Brothers reported a pre-tax profit of USD 90.4 million partly because it booked USD 101.6 million of gains on “modification of debt” on the back of its restructuring. The company also recorded an allowance for impairment of advances for the purchase of raw materials, amounting to USD 293.3 million as of 30 September 2025. Net operating cashflow turned positive to USD 622,297 from an outflow of USD 12.1 million a year earlier, as Pan Brothers paid sharply lower interest while cutting payments to suppliers and employees.
👕 𝗥𝗲𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗶𝗻𝗴 𝗹𝗶𝗳𝗲𝗹𝗶𝗻𝗲 𝗶𝘀 𝗿𝗲𝗰𝗲𝗱𝗶𝗻𝗴: I flagged six months ago that Pan Brothers could be headed for a third debt restructuring as a sales recovery looked elusive. I also noted that the company already went through a court-supervised restructuring (PKPU) in Indonesia last year and may run into a similar challenge faced by its textile peer, Sritex, which was declared bankrupt by a local court after defaulting on its own PKPU agreement. Pan Brothers’ latest results confirmed that while it has been kept afloat by the relief from its completed restructuring, this lifeline may eventually run out without an improvement in its business fundamentals.