DIP Financing in Indonesia 2026, How Debtor-in-possession Financing Works in PKPU and Bankruptcy

DIP financing indonesia is one of the most consequential and least well-documented tools available to distressed companies and the lenders willing to back them through insolvency. As restructuring activity intensifies and the Indonesia Insolvency Conference 2026 draws practitioners into fresh debate about how courts should treat post-petition creditors, decision-makers need practical, document-level guidance rather than high-level commentary. This guide explains how debtor-in-possession financing operates within Indonesia’s Penundaan Kewajiban Pembayaran Utang (PKPU) and bankruptcy regimes under Law No. 37 of 2004, where court approval sits in the process, what protections lenders can realistically negotiate, and how to structure DIP loans that stand up to scrutiny.

It is written for CFOs, turnaround teams, creditors, lenders and insolvency counsel who must decide, quickly, whether to provide or accept rescue funding.

Executive summary: when DIP financing in Indonesia makes sense

DIP financing indonesia is appropriate when a business is fundamentally viable but has run out of working capital during a formal insolvency process, and where new money is the only path to preserving going-concern value. In Indonesia the mechanics differ meaningfully depending on the procedure. In PKPU, the court-supervised suspension of payment obligations designed to produce a composition plan (perdamaian), the debtor’s management typically remains in place alongside a court-appointed administrator (pengurus), which creates space for interim financing that supports operations while a plan is negotiated.

In bankruptcy (kepailitan), by contrast, a receiver (kurator) takes control of the estate (boedel), debtor autonomy is heavily curtailed, and any post-petition funding must be justified against the interests of the estate and its creditors.

The practical takeaway is that PKPU is generally the more receptive environment for rescue funding, while bankruptcy financing indonesia is possible but harder to arrange and more dependent on the kurator and the supervisory judge. For decision-makers, three immediate steps matter: engage restructuring counsel before any petition is filed; prepare a court-ready term sheet and application package; and run regulatory, OJK and tax checks on the proposed structure before committing capital.

What is DIP financing and the legal framework in Indonesia?

Debtor-in-possession financing, often called post-petition financing, is new credit extended to a company after an insolvency process has commenced. The label originates in United States Chapter 11 practice, where the debtor remains “in possession” of its business and borrows fresh money that ranks ahead of pre-existing claims. Indonesian statute does not use the term “DIP financing” and does not import the US superpriority machinery wholesale. Instead, practitioners describe local equivalents built around the flexibility of PKPU and the estate-administration rules of bankruptcy under Law No. 37 of 2004 concerning Bankruptcy and Suspension of Debt Payment Obligations.

Because the terminology does not map neatly, it is essential to think in terms of what the Indonesian framework actually permits: interim funding raised during PKPU to keep a business trading while a composition plan is prepared, and post-petition funding taken on by a kurator during bankruptcy to preserve or realise estate value. The commercial logic of DIP loans, priority repayment, tight covenants, ring-fenced collateral, can often be reconstructed under Indonesian law, but only through careful structuring, court engagement and, frequently, creditor consent.

Key statutory provisions to know (Law No. 37 of 2004)

Law No. 37 of 2004 is the primary statute governing both bankruptcy and PKPU. It sets out how a PKPU petition is filed and granted, how the temporary suspension of payment (PKPU Sementara) can be extended to a permanent suspension (PKPU Tetap), how creditors’ meetings are convened and how they vote on a composition plan. It also governs the opening of bankruptcy, the appointment and powers of the kurator, the supervisory role of the supervisory judge (hakim pengawas), and the treatment of secured and preferential creditors. Any DIP financing indonesia structure must be tested against these provisions, because the enforceability of priority arrangements, security and repayment sequencing all flow from the statute rather than from contract alone.

Where the statute is silent or ambiguous, as it often is on the precise ranking of new post-petition money, the gaps are filled by court practice and negotiated creditor arrangements.

Who decides, judges, creditors’ meetings and the kurator

Understanding who holds authority at each stage is central to any financing strategy. In PKPU, decisions cluster around several actors: the Commercial Court (Pengadilan Niaga, which grants the suspension, sets deadlines and ratifies the plan), a supervisory judge, the appointed administrator (pengurus), and the creditors’ meeting, which ultimately votes on the composition plan and often on material transactions affecting creditors. In bankruptcy, the kurator manages and liquidates the estate under the oversight of the supervisory judge, and significant actions, including encumbering estate assets or borrowing, typically require the supervisory judge’s approval and, in practice, engagement with the creditor body.

A lender that fails to identify the correct decision-maker for its particular ask will waste time and risk having its arrangement unwound.

For readers weighing which counsel to instruct, there is no single “best” law firm in Indonesia for this work; the right adviser is the one with demonstrable PKPU and DIP experience for your sector and deal size. The FAQ below addresses adviser selection and independent rankings neutrally.

DIP/Post-petition financing in PKPU: process, court approval and typical protections

PKPU financing is where most Indonesian rescue-funding activity concentrates, because the procedure is designed to keep a viable business operating while its debts are restructured. PKPU begins with a petition, filed by the debtor or a creditor, to the Commercial Court. Once granted, the court imposes a temporary suspension of payment (PKPU Sementara), during which enforcement action is generally stayed and a composition plan can be developed. Creditors are convened, claims are verified, and the process moves toward a vote on the plan; if creditors approve by the statutory majorities, the plan is ratified (homologasi) by the court and binds the estate.

Interim financing PKPU sits inside this window. The rationale is straightforward: without working capital, the very business the process is trying to save may collapse before creditors ever vote. Lenders therefore look for a structure that funds operations during the suspension while securing repayment ahead of, or at least alongside, existing creditors. Because Indonesian statute does not codify a US-style superpriority, the practical route to protection combines court engagement, creditor consent and a robust security package.

Step-by-step: how to propose and obtain approval for interim financing in PKPU

1. Prepare the commercial case. Produce a short liquidity forecast showing why new money is needed, how much, over what period, and what value it preserves for creditors.
2. Agree a term sheet with the lender. Fix the amount, pricing, security, priority ask, covenants and conditions before approaching the court or creditors.
3. Engage the administrator and key creditors early. In PKPU the composition and the treatment of new money will need creditor support; securing informal buy-in before any meeting reduces execution risk.
4. File the supporting application and evidence. Present the forecast, the term sheet, the proposed security and an explanation of why the financing benefits the estate, so the court, supervisory judge and creditors can assess it on the record.
5. Obtain the necessary approvals. Depending on the ask, this may involve the creditors’ meeting and court or supervisory-judge endorsement of the financing and any security to be granted.
6. Perfect security and draw down. Complete registration and perfection steps before or immediately upon drawdown so the lender’s protections are effective from day one.

Practitioner observation: courts and creditors respond best to financing that is modest, tightly ring-fenced and clearly value-preserving. An over-reaching priority request that materially prejudices existing secured creditors invites opposition and delay.

Typical DIP loan protections in PKPU

• Interim priority. Structuring repayment of new money to rank ahead of general unsecured claims, subject to creditor and court acceptance.
• Ring-fencing and escrow. Segregating advanced funds and receivables into controlled accounts so proceeds are traceable and applied to agreed purposes only.
• Roll-up mechanics. Where negotiated, pre-petition exposure of the new-money lender may be rolled into the priority facility, a sensitive point that requires creditor and court comfort.
• Step-in and control rights. Rights to intervene in operations or accounts on default, preserving the lender’s collateral position.
• Tight information covenants. Frequent reporting on cash, receivables and plan progress so the lender can act early on deterioration.

Documentation checklist for PKPU interim financing

• Term sheet setting out amount, pricing, priority, security and conditions precedent.
• Facility agreement drafted for the insolvency context, with PKPU-specific events of default.
• Security documents (fidusia, mortgage/hak tanggungan, pledge over shares or receivables) with a perfection plan.
• Court application and supporting evidence, including the liquidity forecast and value-preservation rationale.
• Intercreditor or standstill terms addressing how the new money interacts with existing secured creditors.
• Escrow/account-control documentation for ring-fenced proceeds.

A recurring negotiation theme is the distinction between pre-petition and post-petition exposure. Lenders naturally push to protect legacy debt through roll-ups, while existing creditors resist anything that dilutes their recovery. The workable middle ground is usually a clean new-money facility, priced to reflect risk, with any roll-up limited and transparently disclosed.

DIP/Post-petition financing in bankruptcy: kurator, priority and enforceability

Once bankruptcy is opened, the dynamics shift. The debtor loses control over the administration and disposal of its assets, and a kurator is appointed to administer and, ultimately, realise the estate under the supervision of the supervisory judge. This concentration of authority makes bankruptcy financing indonesia more difficult than PKPU funding: the debtor cannot simply agree new borrowing over estate assets, and any financing must be justified by reference to the estate’s interests and executed by the kurator with appropriate approvals.

When can a kurator accept post-petition financing?

A kurator’s core mandate is to preserve and realise estate value for the benefit of creditors. Post-petition financing may be consistent with that mandate where, for example, short-term funding is needed to complete a sale process, maintain assets pending realisation, or preserve going-concern value ahead of a disposal that yields a better return than a fire sale. Because encumbering estate assets and incurring new obligations affect creditors, such steps typically require the supervisory judge’s approval and, in practice, engagement with the creditor body. Lenders should assume that documentation will need to evidence the estate benefit clearly and that approvals must be obtained before, not after, funds are advanced.

Priority and enforceability: what happens in practice

The enforceability of a post-petition lender’s priority is the central risk in bankruptcy financing. Indonesian statute does not provide a codified superpriority for new money equivalent to US Chapter 11, so the ranking of post-petition credit is shaped by court approval, the characterisation of the financing (for instance, as an estate expense necessary to administration), and the security taken. Practitioners therefore treat priority as something to be established affirmatively through court engagement and documentation rather than presumed. Where courts have addressed post-petition funding and creditor priority, outcomes have turned on the specific facts, the demonstrated benefit to the estate and the approvals obtained, which is why early, evidenced court engagement is indispensable.

Any lender relying on a particular priority outcome should have counsel test the position against current Supreme Court (Mahkamah Agung) decisions rather than assume it.

Interaction with secured creditors and asset sales

Pre-existing secured creditors hold strong positions in bankruptcy, and their rights to enforce against, or be paid from, their collateral condition what a post-petition lender can achieve. Financing that touches encumbered assets must be reconciled with those secured rights, usually through consent, a carve-out, or an arrangement that leaves secured recoveries intact while funding the broader administration. Where the financing is intended to fund or bridge an asset sale, the waterfall, how sale proceeds are applied among the new-money lender, secured creditors and the estate, must be agreed and, ideally, sanctioned by the court, so that enforcement later does not become contested.

How to structure DIP loans in Indonesia, commercial and legal terms

Structuring is where deals succeed or fail. Effective DIP financing indonesia balances the lender’s need for protection with the estate’s need for approvable, value-preserving funding. The following components should appear in any well-built facility, with all sample language treated as illustrative only and reviewed by counsel before use.

Economic terms

Pricing must reflect genuine insolvency risk while remaining defensible to a court and creditor body that will scrutinise whether the terms are fair to the estate. Typical elements include an interest margin reflecting distress, arrangement and commitment fees, and, where negotiated and disclosed, a roll-up of a portion of the lender’s pre-petition exposure. Superpriority-style repayment ahead of general claims should be requested explicitly and supported by the value-preservation rationale, because it will only hold if approved and documented rather than assumed.

Security package and perfection in Indonesia

The security package is the backbone of lender protection. Common instruments include fidusia security over movable assets and receivables, hak tanggungan (mortgage) over land and buildings, and pledges (gadai) over shares. Each has its own perfection formality, registration being critical to enforceability and priority, and the facility must include a clear perfection plan with responsibility and deadlines allocated. In an insolvency context, timing is acute: security that is granted or perfected too late, or that could be characterised as prejudicial to other creditors and open to avoidance (actio pauliana), is exposed to challenge, so counsel should confirm both the mechanics and the timing before drawdown.

Covenants, reporting and events of default

Covenants for DIP loans must be adapted to the insolvency process. Alongside standard financial and information covenants, lenders should build in triggers tied to the procedure itself: failure to meet PKPU milestones, rejection or non-ratification of the composition plan, removal or replacement of key officeholders, or deviation from the agreed budget. Reporting should be frequent, often weekly cash reporting, so the lender detects deterioration early and can act while collateral value remains.

Intercreditor agreement essentials

Because new money almost always sits alongside pre-existing debt, intercreditor mechanics are decisive. Key terms include the ranking of the new-money facility relative to existing secured and unsecured claims, any subordination of pre-petition debt, enforcement standstill provisions restraining other creditors during the process, and carve-outs allowing the DIP lender to enforce or protect its ring-fenced collateral. A well-drafted intercreditor agreement reduces the risk of a disorderly enforcement race that destroys the value the financing was meant to preserve.

Court approval clauses and supporting evidence

Facilities should be drafted on the assumption that approval is a condition, not a formality. Conditions precedent should reference the necessary court and creditor approvals, and the application to the court should attach the liquidity forecast, the term sheet, the security documents and a clear statement of estate benefit. The stronger the evidentiary record, the easier it is for the court and creditors to sanction the arrangement and the harder it becomes to challenge later.

Illustrative clause snippets (for discussion only, require counsel review):

• Roll-up. “Upon each drawdown of the New Money Facility, an equal amount of the Lender’s Pre-Petition Exposure shall be deemed repaid and re-advanced as part of the Priority Facility, subject to the approvals set out in Clause [X] and to the extent permitted by applicable law and any order of the Court.”
• Interim priority. “The Borrower shall procure that all obligations under this Agreement rank in priority to unsecured claims arising before the Commencement Date, to the fullest extent sanctioned by the Court and agreed by the relevant creditors.”
• Escrow and waterfall. “All proceeds of the Ring-Fenced Assets shall be paid into the Controlled Account and applied first in discharge of the Priority Facility, and thereafter in accordance with the agreed Waterfall and any order of the Court.”

Lender protections and enforcement strategies in Indonesia

Even a well-structured facility is only as good as the lender’s ability to enforce it. Protection in the Indonesian context blends contractual rights with procedural tools available through the Commercial Court, and requires attention to director conduct risks that can undermine collateral.

How to obtain urgent or provisional relief

Where value is at immediate risk, lenders should be prepared to seek provisional or interim measures through the appropriate court, supported by evidence of urgency and prejudice. Speed matters: relief sought promptly, on a clear evidentiary record, is far more effective than an application made after assets have dissipated. Building the evidential foundation, accounts, security registrations, correspondence, from the outset makes urgent applications materially stronger.

Practical enforcement sequencing

Enforcement should be sequenced deliberately. That typically means securing and preserving collateral first, including any available attachment (sita) measures, before moving to execution against security once entitlement is established. Throughout, lenders should watch for insider transactions and asset stripping, both because they erode recoveries and because such conduct can carry exposure for directors and be subject to avoidance actions. Robust covenants restricting related-party dealings, combined with early monitoring, are the most effective way to prevent value leakage before enforcement is needed.

Practical checklist and negotiation playbook for DIP financing indonesia

DIP financing indonesia rewards preparation. The following checklists distil the priorities for each side, followed by a comparison of how funding is treated in PKPU versus bankruptcy.

Lender checklist:

• Confirm the procedure (PKPU or bankruptcy) and the correct approving authority.
• Obtain and stress-test the debtor’s short-term liquidity forecast.
• Fix pricing to reflect distress risk while remaining approvable.
• Identify and value the security package; agree a perfection plan with deadlines.
• Establish ring-fencing and account control for advanced funds.
• Negotiate priority explicitly and document the value-preservation rationale.
• Secure intercreditor terms, including standstill and enforcement carve-outs.
• Build procedure-linked events of default and weekly reporting.
• Make drawdown conditional on required court and creditor approvals.
• Run OJK, tax and regulatory checks before committing.
• Prepare a provisional-relief and enforcement plan in advance.

Debtor checklist:

• Engage restructuring counsel before filing any petition.
• Prepare a credible liquidity forecast and use of proceeds.
• Scope the minimum funding needed to preserve value.
• Map creditor sentiment and secure early buy-in for new money.
• Assess what security can be granted without prejudicing enforceability.
• Confirm corporate approvals and director-duty compliance.
• Prepare the court application and supporting evidence.
• Negotiate covenants that are realistic against the operating plan.
• Address roll-up requests transparently to avoid creditor opposition.
• Plan the composition-plan timeline around the financing.

Negotiation red flags and mitigation

• Over-reaching priority. A priority ask that materially harms secured creditors invites opposition; mitigate by ring-fencing and modest sizing.
• Aggressive roll-ups. Large, opaque roll-ups derail creditor support; disclose and limit them.
• Late security perfection. Delayed registration risks challenge; perfect before or at drawdown.
• Missing approvals. Advancing funds before court/creditor sanction risks the whole structure; make drawdown conditional.
• Weak evidence. Thin forecasts undermine approval; invest in a credible value-preservation case.

Case studies, trends and 2026 developments in DIP financing indonesia

The direction of travel in 2026 favours greater sophistication in rescue funding. Practitioner dialogue around the Indonesia Insolvency Conference 2026 reflects growing interest in how post-petition money can be structured, approved and protected within the existing Law No. 37 of 2004 framework, and how courts should treat the priority of creditors who fund a business through its process. At a high level, the pattern practitioners describe is one of increasing willingness to accommodate carefully evidenced, value-preserving financing in PKPU, alongside continued caution in bankruptcy where estate and secured-creditor interests dominate.

What practitioners are debating in 2026, implications for lenders

The live debates concern the certainty of priority for new money, the evidentiary standard courts should apply when sanctioning financing, and the regulatory dimension for financial institutions acting as lenders to distressed borrowers. For lenders, the implication is clear: while appetite and acceptance are growing, protection is earned through documentation, court engagement and creditor consensus rather than assumed from any statutory superpriority. Lenders that build their case early, and test priority assumptions against current court practice, are best placed to capture the opportunity while managing enforcement risk.

Conclusion and recommended next steps

DIP financing indonesia is a powerful but exacting tool: it can preserve going-concern value and hand lenders strong protections, but only where the structure is built for the specific procedure and sanctioned on a solid evidentiary record. PKPU offers the more receptive environment, while bankruptcy financing is possible with kurator and court support justified by estate benefit. Three actions should anchor any plan: engage experienced Indonesian restructuring counsel early; prepare a standard term sheet and court-ready application package; and run OJK, tax and regulatory checks before capital is committed. Done well, DIP financing indonesia converts a distressed situation into a controlled, value-preserving process for lender and debtor alike.

Readers can explore the Insolvency practice area, Indonesia and the GLE Lawyer Directory, Indonesia: Insolvency specialists to identify counsel with direct PKPU and DIP experience.

Sources

1. Undang-Undang Republik Indonesia No. 37 Tahun 2004 tentang Kepailitan dan Penundaan Kewajiban Pembayaran Utang
2. Mahkamah Agung (Supreme Court), Putusan (decision repository)
3. Otoritas Jasa Keuangan (OJK), official site
4. Perhimpunan Advokat Indonesia (PERADI), Indonesian Bar Association
5. UNCITRAL, Insolvency and Cross-Border Insolvency materials
6. Indonesia Insolvency Conference 2026, AKPI