JAKARTA: Troubled Indonesian state builder PT Wijaya Karya has signed a debt restructuring agreement valued at 20.58 trillion rupiah (US$1.31bil).

       The construction company entered the agreement with 11 financial institutions, including PT Bank Mandiri, PT Bank Negara Indonesia, PT Bank Rakyat Indonesia, PT Bank Tabungan Negara, PT Bank Syariah Indonesia, and PT Bank Panin, according to company statements.

       The deal covers 87.1% of the debt being restructured as of Jan 23, it said.

       Wijaya Karya is one of Indonesia’s major government-owned construction companies that have seen liabilities balloon amid an aggressive push to build infrastructure under the presidency of Joko Widodo.

       Fellow state builder PT Waskita Karya expects to finalise its own debt restructuring deal this month.

       The broader real estate sector has been a hotspot for debt distress not just in Indonesia but also the rest of Asia due to higher interest rates, stifling property sales and rising refinancing costs.

       Vietnam, Hong Kong and South Korea are among those flashing warning signs.

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       The deal shows lenders’ confidence that Wijaya Karya is “capable of recovering and are willing to take part in this movement,” president director Agung Budi Waskito said in the statement.

       The company has switched 93% of its projects to a payment mechanism based on monthly progress, a huge increase from the 40% in 2016, it said.

       It has also sped up the collection of receivables. There will be three tranches of payment, according to a separate filing. —Bloomberg