Govt prepares options to help Garuda<\/p>\n
Rendi A. Witular, The Jakarta Post\/Jakarta<\/p>\n
The government has prepared several options to help ease national
\nflag carrier Garuda Indonesia's financial problems and boost its
\ncompetitiveness in the cutthroat airline industry.<\/p>\n
Ministry for State Enterprises official Ferdinand Nainggolan
\nwould not go into detail about all the options on Thursday but
\nsaid one was to convert the airline's debts into equity.<\/p>\n
He said the government had ruled out the option of refinancing
\nGaruda's massive dollar-denominated debts because it feared that
\nno financial institutions would be willing to lend to the airline
\nor buy its bonds given its low investment rating.<\/p>\n
"Are there any companies that want to buy Garuda debts? Debt
\nrefinancing would be the last option. There are actually other
\navailable options, including converting debt into equity," said
\nFerdinand after a hearing with the House of Representatives
\nCommission XI for financial affairs.<\/p>\n
The airline should seek approval from its creditors for a
\nrefinancing program, he said.<\/p>\n
Garuda president director Indra Setiawan recently told the
\nHouse Commission V for transportation and communication, that the
\nairline had been left behind by its competitors in the region due
\nto its inability to expand or rejuvenate its fleet because of a
\nlack of funds and the limit on new borrowing set by its
\ncreditors. Creditors have only allowed the firm to borrow a total
\nof US$25 million over 10 years.<\/p>\n
Indra said one of the options to boost the airline's
\ncompetitiveness and not repeat its financial difficulties as it
\nexperienced in 1998 was to refinance the airline's debts.<\/p>\n
Garuda defaulted on more than $1.1 billion in debts to
\ninternational creditors during the Asian financial crisis in late
\n1997. The government and creditors agreed to restructure the
\ndebts in 2001.<\/p>\n
As of this year, the airline's debts stand at $850 million, of
\nwhich some $650 million is owed to an international consortium
\nconsisting of creditors in the United Kingdom, Germany and
\nFrance. The remaining $200 million is in the form of promissory
\nnotes, which are due in 2007.<\/p>\n
This year, Garuda is scheduled to pay some $115 million of the
\ndebt, including interest.<\/p>\n
Garuda operational revenue was estimated to reach Rp 10
\ntrillion ($1.1 billion) this year, up from Rp 8.3 trillion last
\nyear. The airline's passengers were also projected to rise to
\nabout eight million from last year's seven million.<\/p>\n
Elsewhere, State Minister of State Enterprises Sugiharto said
\nmost urgent problem that needed to be settled in the airline was
\nthe appointment of new management.<\/p>\n
"There are two main problems in Garuda. The first is the
\nmanagement reshuffle and the second is its financial performance.
\nWe expect to settle these issues within the first 100 days of the
\nnew government," Sugiharto said without elaborating further.<\/p>\n
The ministry is currently selecting executives to replace
\noutgoing chief, Indra, whose term ended more than a year ago.<\/p>\n
Meanwhile, Garuda's vice president for corporate
\ncommunications Pujobroto insisted on Thursday that Garuda was
\ncommitted to servicing its debt obligations.<\/p>\n
Pujobroto said that by November 2004, the airline had paid
\n$390.39 million to its creditors, comprising $256.78 million of
\nthe principle and $133.61 million in interest.<\/p>\n
Garuda was also preparing to pay another $67.4 million to its
\ncreditors this month, comprising $61.05 million of the principle
\nand $6.3 million in interest, Pujobroto said.<\/p>\n
No decision had yet been made by Garuda's management about the
\nrefinancing and Pujobroto said the company had never discussed
\nthe options with the government.<\/p>",
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