Garuda to meet creditors this week
Garuda to meet creditors this week
JAKARTA (JP): National flag carrier Garuda Indonesia said on
Wednesday that it would meet with various local and foreign
creditors this week to finalize its debt restructuring proposal,
one of the airline's executives said.
Garuda's executive vice president finance Emirsyah Satar said
that a negotiation team would fly to Singapore on Friday in the
hope of striking a deal with the company's creditors.
"It's like we're offering them a menu that they will have to
study," Emirsyah said on the sidelines of a hearing with the
House of Representatives' Commission IX for financial affairs.
In two to three weeks from now, he said, the creditors would
give a response to Garuda's debt restructuring proposal.
He added that some of Garuda's major creditors already knew
about the proposal.
They included the European Credit Agency (ECA) with a $610
million stake and state-owned Bank Mandiri with a $103 million
stake, he said.
ECA is a consortium of credit agencies in France, Britain and
Germany, that leased six A330 aircraft to Garuda.
In July the government approved Garuda's proposal, in which
Bank Mandiri would partly guarantee the airline's debts to ECA.
Bank Mandiri's participation was a precondition set by ECA for
agreeing to the debt restructuring proposal.
Under the proposal, the bank would provide a guarantee of up
to $100 million.
The government also agreed to convert Bank Mandiri's $103
million worth of loans to the airline into five-year bonds
bearing a coupon rate of four percent.
Emirsyah said that although ECA and Bank Mandiri knew about
the debt restructuring proposal, it was too early to say whether
both would support it.
Garuda said that $601 million of its debt was in promissory
notes and bank loans, and $1 billion in outstanding payments for
leased aircraft.
Its debt restructuring proposal also includes a $422 million
bailout by the government for the leasing of 11 B-737 aircraft.
In a written response to the Commission's questions, the
airline estimated that continued improvements in its operations
would result in a net cash flow of $610 million within the next
five years.
Garuda also planned to float its shares on the Jakarta Stock
Exchange by 2003.
Emirsyah said that Garuda was considering either inviting
strategic investors or floating its shares.
However, he added that a strategic investment did not
necessarily mean investment in equity.
"It may not be a company that actually injects money," he
explained.
Emirsyah said Garuda might establish joint operations with
strategic partners as part its efforts to improve its
competitiveness.
He pointed out that joint operations between airlines, such as
Star Alliance and One World, were examples of strategic
investment that did not involve cross-ownership.
Garuda, he said was eyeing several airlines as potential
strategic investors, but he refused to name them.
"If we want to join an alliance, then we must convince
everyone that we're up to their standards," he said.
He explained that based on an evaluation conducted by Deutsche
Bank, the company's book value by the year 2003 would be in
excess of US$1 billion.
He added that the company now suffers from a negative equity
of about Rp 1.5 trillion. (bkm)