Chapter 4

Funding and Covenants

Erajaya funds its inventory with annually-renewed, secured bank lines from two Indonesian banks, and the collateral is the inventory and receivables themselves. At 30 June 2026 interest-bearing debt was Rp7,980.8 billion against Rp10,944.6 billion of equity — 0.73 times, versus a 2.0 times internal ceiling. Every disclosed covenant is met with room to spare, and the tightest test is measured on 30 June, not on the December balance sheet the annual report prints.

How the balance sheet is funded

The debt stack is short, secured and bank-held. At 30 June 2026 short-term bank loans were Rp3,363.1 billion, the current portion of long-term bank loans Rp449.9 billion, and the non-current portion Rp2,344.9 billion [1]. Adding lease liabilities and the other interest-bearing items the company itself counts, total interest-bearing debt was Rp7,980.8 billion against equity of Rp10,944.6 billion, a ratio of 0.73 times [2]. The group's stated policy is to hold that ratio to not more than 2.0 times [3].

Source: Q2 FY2026 consolidated financial statements, Note 38 Capital Management and consolidated statement of financial position [4] [5].

The ratio has been stable inside a narrow band while the business doubled its inventory: 0.86 times at 31 December 2023, 0.73 times at 31 December 2024, 0.92 times at 31 December 2025 and 0.73 times again at 30 June 2026 [6] [7] [8].

Source: FY2024 Annual Report, Note 38 [9]; FY2025 Annual Report, Note 38 [10]; Q2 FY2026 statements, Note 38 [11].

Secured, annual, and concentrated

Two Indonesian banks carry almost all of it. PT Bank Central Asia has been a lender since a joint-borrower agreement signed on 14 December 2009; PT Bank Mandiri joined with its own joint-borrower agreement on 28 August 2023 [12] [13].

Three features of those agreements matter more than the headline leverage.

The security is the working capital. The BCA facilities are secured on the receivables and inventories of the borrowing entities, plus land and buildings with a net book value of Rp586.5 billion at 31 December 2025 [14]. The Mandiri facilities are secured on the same receivables and inventories [15]. In substance this is borrowing-base lending: the asset that consumes the cash is also the asset that supports the borrowing.

The tenor is one year, renewed. The BCA joint-borrower facilities ran to 13 May 2026 and were extended to 13 May 2027 [16]. The Mandiri facilities ran to 14 September 2025 and were extended to 14 September 2026 [17]. The record of extensions is unbroken across the five annual reports in the corpus, but the legal position renews each year rather than terming out.

The lenders hold approval rights over corporate actions. Under the BCA agreement the borrowers must obtain written approval before making new investments or establishing new businesses, selling core fixed assets, changing the composition of the boards of commissioners, directors or shareholders, acting as guarantor or pledging assets, taking new loans from another lender, or lending to third parties. Changes in the shareholding of named subsidiaries that would take the parent below 51 per cent also require consent. Declaring a dividend requires notification rather than approval [18]. Mandiri holds a comparable set [19].

The trade financing sits alongside. BCA provides bank guarantee and standby letter of credit capacity of up to US$175,000,000 plus Rp650.0 billion, and Mandiri a standby letter of credit line of up to US$150,000,000 [20] [21]. Supplier credit at this group is therefore not free-standing trade credit; a material part of it rests on the same two bank relationships as the cash borrowings.

The covenant tests, computed

BCA requires four maintenance ratios: a current ratio of not less than 1.0 times; EBITDA to interest expense of not less than 1.5 times; the sum of accounts receivable and inventories to outstanding short-term working-capital bank loans of not less than 1.1 times; and EBITDA after tax to total loan principal and interest payments of not less than 1.2 times. The company reports compliance at 31 December 2025 [22]. Mandiri requires three of the same four [23].

Three of them can be recomputed from the filed statements. The first two are shown below; the debt-service test depends on a contractual definition of scheduled principal that the filings do not give, so it is left out rather than estimated.

Source: derived from the consolidated statements of financial position at each date — FY2023 audited statements [24], FY2024 audited statements [25], H1 2025 statements [26], FY2025 Annual Report [27] and Q2 FY2026 statements [28] [29].

The current ratio has drifted down and remains the binding constraint in practice. At 31 December 2025 current assets of Rp19,894.2 billion covered current liabilities of Rp17,156.5 billion by Rp2,737.7 billion [30]. A 13.8 per cent write-down of current assets, with liabilities unchanged, would take the ratio to 1.00. That is a wide margin, but it is the narrowest reading in the corpus and it narrowed in each of the three Decembers before the June 2026 recovery to 1.264, when current assets of Rp18,275.7 billion stood against current liabilities of Rp14,453.2 billion [31] [32].

Interest cover is not close to its floor. Operating profit plus depreciation and amortisation was Rp2,761.7 billion in FY2023, Rp3,276.4 billion in FY2024 and Rp3,823.7 billion in FY2025, against interest expense of Rp509.0 billion, Rp551.2 billion and Rp527.0 billion — cover of 5.4, 5.9 and 7.3 times against a 1.5 times minimum [33] [34] [35]. On the twelve months to 30 June 2026 the figures are Rp4,255.4 billion and Rp535.4 billion, or 7.9 times [36] [37].

Source: derived from the FY2024 Annual Report Notes 27, 28 and 30 [38] [39], the FY2025 Annual Report Notes 15, 28 and 30 [40] [41] and the Q2 FY2026 statements Notes 15, 27, 28 and 30 [42] [43].

The peak is not at year-end

The December balance sheet is the one that gets audited, printed and quoted, and in this business it is systematically the calm point. Short-term bank loans stood at Rp2,734.0 billion at 31 December 2024 and Rp7,901.3 billion six months later, on 30 June 2025 — 2.9 times the figure the FY2024 annual report carries [44] [45].

Sources: quarterly and audited consolidated statements of financial position, December 2023 through June 2026 — FY2023 [46], FY2024 [47], H1 2025 [48], FY2025 [49] and H1 2026 [50].

The covenant arithmetic follows the same rhythm. At 30 June 2025 receivables and inventories of Rp12,823.9 billion covered short-term bank loans of Rp7,901.3 billion by 1.62 times — still comfortably above the 1.1 times floor, but less than half the 3.03 times cushion the previous December balance sheet had shown [51] [52]. Anyone underwriting the balance sheet from annual reports alone sees leverage at its low, twice removed from where the group actually runs.

Liquidity has the same shape. The FY2025 maturity table shows Rp8,634.3 billion of financial liabilities repayable on demand and a further Rp8,366.3 billion falling due within a year, against Rp1,033.5 billion due in one to five years and cash of Rp2,131.0 billion [53] [54]. Roughly 94 per cent of the group's financial obligations sit inside twelve months. What makes that workable is not cash but undrawn capacity.

Undrawn capacity

At 30 June 2026 the two Indonesian relationship banks had extended revolving and overdraft limits of Rp10,800.0 billion that were effective on the date: a BCA overdraft line of Rp1,600.0 billion, BCA Time Loan 1 of Rp3,450.0 billion, Time Loan 2 of Rp1,250.0 billion effective (of a Rp1,550.0 billion facility), Time Loan 3 of Rp1,500.0 billion, and a Mandiri joint-borrower revolving facility of Rp3,000.0 billion [55] [56]. Drawings against those two banks on the same date were Rp2,085.6 billion of BCA revolving loans, Rp3.4 billion of BCA overdraft, Rp655.0 billion of Mandiri revolving loans, and the parent's Rp1,250.0 billion long-term drawing from BCA, which matches the Time Loan 2 limit exactly and which the FY2025 note confirms is carried in long-term debt [57] [58].

Source: derived from Q2 FY2026 consolidated financial statements, Note 16 Bank Loans [59] [60] [61].

That leaves roughly Rp6,806 billion undrawn on the two core relationships, against Rp1,312.4 billion of cash [62]. It is also more headroom than existed a year earlier: Time Loan 3 of Rp1,500.0 billion first appears in the 31 December 2025 disclosure, and Time Loan 2 was raised from Rp1,250.0 billion to Rp1,550.0 billion during the first half of 2026 [63] [64]. The caveat is that these are facility limits with stated expiry dates, not multi-year irrevocable commitments; the whole stack is re-underwritten annually by two counterparties who already hold the inventory as security.

A credit line sized to the tax claim

One line in the June 2026 disclosure connects the funding to the receivable examined in Tax Refund Block. Time Loan 2 was increased to Rp1,550.0 billion, and the note states that the additional Rp300.0 billion "will only become effective upon the submission of written proof that the application for a Tax Exemption Certificate (SKB) has been rejected by the government" [65].

Two facts follow from that sentence. Erajaya has applied for an exemption from the import withholding that creates its refund claims — an attempt to stop the drag at source that appears nowhere else in the filings. And its principal lender has pre-committed the bridge financing that becomes necessary if the application fails. The bank has, in effect, priced and sized the tax problem before the market has.

The filings do not say when the application was lodged or when a decision is expected, and no outcome is disclosed. Treated as a watch item rather than a forecast: an SKB granted would remove the largest single reason this company needs a working-capital facility at all; an SKB refused draws Rp300.0 billion more debt.

What the notes repayment removed

Until 2026 the group also carried a Singapore dollar bond. On 24 August 2023 Erajaya Digital Pte. Ltd. issued SGD50,000,000 of senior notes, guaranteed by the Credit Guarantee and Investment Facility, a trust fund of the Asian Development Bank, at a 4.50 per cent coupon with a three-year tenor and a 1.25 per cent per annum guarantee fee. The notes were rated AA by S&P Global on the strength of that guarantee, and were due on 24 August 2026 [66]. They were repaid during the first half of 2026, at a cash cost of Rp688.7 billion [67], and the balance is nil at 30 June 2026 [68].

The indenture carried the tightest covenant package the group has had: a current ratio of at least 1.00, a debt service coverage ratio of at least 1.50, a gearing ratio of at most 2.00, consolidated gross debt to EBITDA of at most 3.50, an interest coverage ratio of 1.50, and a security coverage ratio of at least 125 per cent of the outstanding bonds — all tested every six months [69]. The leverage test was the only external constraint on gross debt relative to earnings, and it was the one moving: gross interest-bearing debt to EBITDA ran 2.54 times in FY2023, 2.02 times in FY2024 and 2.46 times in FY2025, before easing to 1.88 times on the twelve months to 30 June 2026. Repaying the notes removed the ceiling at the point in the cycle where the ratio had just risen by nearly half a turn.

That is a smaller loss than it sounds — the company's own 2.0 times gearing policy is unchanged, the bank package retains the current-ratio, borrowing-base and interest-cover tests, and repaying a foreign-currency obligation with local-currency cash flows reduces the currency mismatch on the liability side. It is nonetheless one fewer independent party checking the leverage every six months.

What would change this read

The evidence points to a funding structure that is safer than the short maturity profile first suggests: covenants met with wide margins, gearing at 0.73 times against a 2.0 times ceiling, roughly Rp6.8 trillion of undrawn capacity, and a first half of 2026 in which Rp1,375.5 billion of bank debt and Rp688.7 billion of bonds were repaid [70] against Rp1,864.0 billion of net cash from operating activities [71].

The strongest fact against that read is the mechanism of the collateral. Because the security and the covenant base are both the inventory, a shock that impairs inventory value cuts the borrowing base and the covenant ratio at the same moment, and does so at a company whose entire facility stack is re-underwritten annually by two lenders. FY2025 is the closest thing to a live test: operating cash flow of Rp225.2 billion funded none of the Rp796.0 billion of capital expenditure or the Rp857.7 billion of lease payments, and the gap was met with Rp3,992.3 billion of gross new bank drawings against Rp1,445.1 billion of repayments [72]. The banks funded that year; the question is whether they would fund a year in which the inventory also had to be marked down.

Three observations would change the read. A December current ratio below about 1.10, which on the FY2025 balance sheet would cut the cushion between current assets and current liabilities from Rp2.74 trillion to roughly Rp1.72 trillion. A renewal of the BCA joint-borrower facilities on materially tighter terms in May 2027, or a shortening of the extension period from the twelve months granted each year since 2009. And an obsolescence charge against the Rp12,480.7 billion inventory large enough to move the borrowing-base ratio — the provision already swung from a Rp15.4 billion net recovery in FY2024 to a Rp32.9 billion net charge in FY2025, on a base that has since grown again [73] [74].