Garuda needs 35 years to clear debts
Garuda needs 35 years to clear debts
JAKARTA (JP): Flag carrier Garuda Indonesia needs at least 35
years to fully repay all of its US$1.8 billion debts, the
airline's president said on Thursday.
Speaking at a hearing with members of the House of
Representatives (DPR), Abdulgani said the economic crisis, which
peaked in late 1997 and early 1998, had caused the airline to
suffer a negative equity of $310 million.
He acknowledged that the ongoing restructuring program for the
airline's debts, finances and operations had resulted in some
improvement on the balance sheets and this would result in a cash
flow of $234 million between 1999 and 2004.
But with the cash flow level and the negative position of its
equity, the airline would still need about 35 years to fully
repay its huge debt, he said.
"Under the financial condition, Garuda has legally been
categorized bankrupt, and as a consequence, the government should
take over all of its obligations," he told the House Commission
IV for infrastructure and transportation affairs in the hearing.
He said the government had agreed to guarantee some of the
airline's debts and the commitment helped the process of debt
negotiations with creditors.
Garuda's outstanding debts of $1.8 billion includes $610
million in airplane leasing fees to the European Credit Agency
(ECA), a consortium of financing institutions from Britain,
France and Germany, $601 million in commercial debts and $420
million in airplane leasing fees to U.S. Exim Bank.
Abdulgani said the government agreed last year to take over
Garuda's obligations to pay the $420 million to Exim Bank.
Garuda is currently undertaking active negotiations with the
consortium to reschedule some $610 million it owed to the agency
for leasing six Airbus 330-300s.
"We expect to sign the agreement in April. ECA has principally
agreed to reschedule the debt repayment term from 12 years to 16
years, but it demands the government provide a guarantee worth
$100 million and to enhance Garuda's capital," he said.
He said the $100 million guarantee was currently being
prepared by state-owned Bank Mandiri.
He said Garuda would also propose creditors to reschedule the
coupon payment of its commercial papers to eight years and to
allow the airline to buy back some of the notes at discounts.
"Under such a program, we hope to be able to reduce the $1.8
billion outstanding debt to $550 million in 2003," he added.
Abdulgani said the restructuring program made a positive
result to the company's 1999 balance sheet, which showed a net
profit of Rp 572 billion, the first since 1990.
Garuda suffered a net loss of Rp 2.33 trillion in 1998, which
was worse than the Rp 1.28 trillion net loss it endured in 1997
and Rp 360 billion in 1996, he said.
"Last year definitely was a spectacular turnaround for Garuda,
both in terms of financial and service operation," he said.
He said Garuda had also performed better in terms of load
factor, revenue per seat per kilometer and on-time performance
this year, due to the advice it received from its two
consultants.
Abdulgani said Garuda had increased its operating revenue to
Rp 7.12 trillion last year from Rp 4.51 trillion in 1998.
He also said that the airline, which used to be criticized for
its delayed schedule, had improved its on-time performance to
record an average of 88 percent in 1999, well above the required
standard of 85 percent set by the Association of Asia Pacific
Airlines.
Abdulgani said the improved operational and financial
condition was expected to help spur the company's debt
restructuring efforts.
He said the company's financial advisor, Deutsche Bank, had
estimated that Garuda would have a net value of about $1.1
billion in 2003. (cst)'