Garuda to meet creditors this week<\/p>\n
JAKARTA (JP): National flag carrier Garuda Indonesia said on
\nWednesday that it would meet with various local and foreign
\ncreditors this week to finalize its debt restructuring proposal,
\none of the airline's executives said.<\/p>\n
Garuda's executive vice president finance Emirsyah Satar said
\nthat a negotiation team would fly to Singapore on Friday in the
\nhope of striking a deal with the company's creditors.<\/p>\n
\"It's like we're offering them a menu that they will have to
\nstudy,\" Emirsyah said on the sidelines of a hearing with the
\nHouse of Representatives' Commission IX for financial affairs.<\/p>\n
In two to three weeks from now, he said, the creditors would
\ngive a response to Garuda's debt restructuring proposal.<\/p>\n
He added that some of Garuda's major creditors already knew
\nabout the proposal.<\/p>\n
They included the European Credit Agency (ECA) with a $610
\nmillion stake and state-owned Bank Mandiri with a $103 million
\nstake, he said.<\/p>\n
ECA is a consortium of credit agencies in France, Britain and
\nGermany, that leased six A330 aircraft to Garuda.<\/p>\n
In July the government approved Garuda's proposal, in which
\nBank Mandiri would partly guarantee the airline's debts to ECA.<\/p>\n
Bank Mandiri's participation was a precondition set by ECA for
\nagreeing to the debt restructuring proposal.<\/p>\n
Under the proposal, the bank would provide a guarantee of up
\nto $100 million.<\/p>\n
The government also agreed to convert Bank Mandiri's $103
\nmillion worth of loans to the airline into five-year bonds
\nbearing a coupon rate of four percent.<\/p>\n
Emirsyah said that although ECA and Bank Mandiri knew about
\nthe debt restructuring proposal, it was too early to say whether
\nboth would support it.<\/p>\n
Garuda said that $601 million of its debt was in promissory
\nnotes and bank loans, and $1 billion in outstanding payments for
\nleased aircraft.<\/p>\n
Its debt restructuring proposal also includes a $422 million
\nbailout by the government for the leasing of 11 B-737 aircraft.<\/p>\n
In a written response to the Commission's questions, the
\nairline estimated that continued improvements in its operations
\nwould result in a net cash flow of $610 million within the next
\nfive years.<\/p>\n
Garuda also planned to float its shares on the Jakarta Stock
\nExchange by 2003.<\/p>\n
Emirsyah said that Garuda was considering either inviting
\nstrategic investors or floating its shares.<\/p>\n
However, he added that a strategic investment did not
\nnecessarily mean investment in equity.<\/p>\n
\"It may not be a company that actually injects money,\" he
\nexplained.<\/p>\n
Emirsyah said Garuda might establish joint operations with
\nstrategic partners as part its efforts to improve its
\ncompetitiveness.<\/p>\n
He pointed out that joint operations between airlines, such as
\nStar Alliance and One World, were examples of strategic
\ninvestment that did not involve cross-ownership.<\/p>\n
Garuda, he said was eyeing several airlines as potential
\nstrategic investors, but he refused to name them.<\/p>\n
\"If we want to join an alliance, then we must convince
\neveryone that we're up to their standards,\" he said.<\/p>\n
He explained that based on an evaluation conducted by Deutsche
\nBank, the company's book value by the year 2003 would be in
\nexcess of US$1 billion.<\/p>\n
He added that the company now suffers from a negative equity
\nof about Rp 1.5 trillion. (bkm)<\/p>",
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