Garuda finalizes restructuring of US$1.4b in debt

JAKARTA (JP): The national flagship carrier Garuda Indonesia has almost completed the restructuring of its massive US$1.4 billion debt, according to a senior official at the airline.

Executive vice president for financial affairs Emirsyah Satar said on Tuesday that the European Credit Agency (ECA), a consortium of foreign creditors from Germany, France and Britain, had approved the restructuring of the $610 million that Garuda owes it.

Emirsyah also said the restructuring proposal for another $422 million owed to U.S. Exim Bank had also been approved and the restructuring of another $400 million owed to various other parties was in the process of being finalized.

"We now have reached the final stages. Almost all the creditors have approved the restructuring proposal," he said on the sidelines of a ceremony marking an agreement between Garuda and state Bank Mandiri.

Garuda has appointed Bank Mandiri as its domestic cash management bank.

Emirsyah said that ECA had approved the restructuring of Garuda's debt after Bank Mandiri agreed to provide a $100 million guarantee as demanded by ECA.

Garuda had borrowed the money from ECA to lease six Airbus aircraft.

Under the debt restructuring plan, ECA would restructure the repayment period of the $610 million debt from 12 years to 16 years with an interest rate of 45 basis points above Libor (London Interbank Offering Rate).

Garuda owes $422 million to U.S. Exim as a result of the purchase of 11 Boeing-737 aircraft by the government between 1997 and 1998.

The aircraft were used by Garuda for its domestic flights.

The Financial Sector Policy Committee (FSPC), which groups several senior economics ministers and is overseeing the country's major corporate debt restructuring program, approved the restructuring of the $422 million debt, which includes the equity participation by the government.

Emirsyah also said the restructuring of about $400 million worth of commercial papers was near completion as around 80 percent of the creditors had expressed their approval.

"In principle, we have obtained the approval (of the creditors)," he said.

He added that with the debt restructuring program, Garuda's debt plus interest payment due this year would amount to around $128 million.

The restructuring of the country's massive corporate debt is a crucial factor to help revive foreign investors' confidence in the ailing economy.

Garuda has been badly hit by the country's economic crisis which started in the middle of 1997 when its passenger load factor plunged and U.S. dollar-based debt ballooned with the sharp depreciation of the rupiah against the dollar.

Garuda had to painfully restructure its debt, finances and operations in a bid to avoid bankruptcy.

Separately, Emirsyah said that Garuda's operating profits in 2001 was projected to increase by 28 percent from around Rp 500 billion last year on the back of a growing passenger volume.

Sales volume in 2001 is projected to increase to more than Rp 8 trillion compared to around Rp 7 trillion in 2000. (rei)