Debt Restructuring Forecast of PT. X During Covid-19 Pandemic Using Monte Carlo Simulation

  • Jeremy Lee
  • Ruslan Prijadi

Abstract

The Covid-19 pandemic has led to the worst economic crisis in Indonesian history. The economic crisis has negatively influenced the financial condition of the majority of the companies operating in Indonesia. PT. X as an Indonesian mining contractor is currently facing financial distress due to its incapability to sustain its healthy cash flow. Debt restructuring is one method for PT. X to escape and restore its financial position during the pandemic. This paper offers managerial recommendations for debt restructuring alternatives by forecasting the Net Present Values using Monte Carlo Simulation with cash flow volatility as the basis of analysis. Three alternatives, such as debt to equity swap, asset liquidation, and debt rescheduling, are considered as the most viable options for PT. X. The results of the simulation showed that Debt to Equity Swap generates the highest Net Present Value of Rp 23 billion, whereas rescheduling and asset liquidation only yields Rp 22 billion and Rp 21 billion respectively. Furthermore, to look for the best outcome in the future, other restructuring methods should be taken into consideration according to the capabilities of the company.

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Published
2021-09-01
How to Cite
LEE, Jeremy; PRIJADI, Ruslan. Debt Restructuring Forecast of PT. X During Covid-19 Pandemic Using Monte Carlo Simulation. International Journal of Advanced Research in Economics and Finance, [S.l.], v. 3, n. 3, p. 50-62, sep. 2021. ISSN 2682-812X. Available at: <https://myjms.mohe.gov.my/index.php/ijaref/article/view/15085>. Date accessed: 20 may 2024.
Section
English Section