Garuda to pledge non-core assets to creditors

JAKARTA (JP): Indonesia's flag carrier Garuda Indonesia expects to pledge four of its business units to its creditors as part of its efforts in closing a debt restructuring deal, a company executive said.

The assets pledged will be used as collateral in the debt restructuring agreement, according to Garuda vice president A. Tjikman.

"The four assets are PT Garuda Information System, PT Garuda Medical Center, PT Garuda Aviation Training and PT Garuda Maintenance Facility," he said.

Tjikman, however, said that Garuda's creditors, about 70 international companies, had yet to agree with the above four assets to be pledged to cover at least some of the restructured debts.

"Some of the creditors have evaluated the value and the business plans of the four companies. We have to convince them (the creditors)," he said.

Tjikman, who is responsible for managing PT Garuda Information System, said the four companies were the supporting business units of Garuda, not the core business of the airline.

"We are not the core business of Garuda. The airline's core business is flying the aircraft," he said.

He added that for PT Garuda Information System, it alone booked a net revenue of some Rp 160 billion last year.

Garuda's corporate communications officer Pudjobroto said the airline's long term business plan was to focus on its core business and to spin off the unrelated business units.

Garuda began its debt restructuring program in early 1998, after sustaining record losses of US$46.4 million that year, having been badly affected by the collapse of the rupiah against the dollar in mid-1997.

The airline's total debt stands at about $1.8 billion, some $422 million of which is guaranteed by the government.

Garuda executive vice president for finance Emirsyah Satar said the debt restructuring deal would definitely be signed this year.

"It's in progress, but it must be signed within the year," he said.

The deal would involve between 12 years and 16 years of debt rescheduling, he said, declining to elaborate further.

He hinted that the first quarter financial performance was better than what had been budgeted for.

The load factor for the first quarter was above 60 percent, he added.

Garuda's outstanding debts of $1.8 billion include $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 the U.S. Bank Exim.(udi)