Garuda to restructure $1.08b in foreign debts
JAKARTA (JP): Debt-ridden flag carrier Garuda Indonesia will meet its creditors in June to hammer out a restructuring agreement over US$1.08 billion in foreign debts, finance director Emirsyah Satar said on Wednesday.
Emirsyah said the airline and its financial advisor Deutsche Bank had been working on a business plan to present to the creditors as the basis for the debt renegotiation deal.
"We will present a business plan in June and request debt restructuring," he said at the State Palace.
Emirsyah said that at successive preliminary meetings in London and Singapore early last month, creditors demanded Garuda present a business plan detailing the airline's corporate restructuring process and business prospects.
He said the debt restructuring plan would cover $100 million in long-term debt, $380 million in short-term promissory notes and $600 million in leasing obligations for six Airbus-330s.
He declined to provide further details.
Garuda began a massive overhaul of its operations and management last year, after the airline was devastated by the sharp decline in the rupiah against the U.S. dollar.
The airline was hit by rising operational costs dominated by dollar-based spending and by plunging passenger numbers as the travel industry was depressed by the financial crisis that started in the middle of 1997.
The company returned six leased aircraft in June as part of its cost-saving measures and had offered an early retirement package to more than a thousand employees.
The airline currently operates 40 aircraft, of which 19 are leased and 21 are owned.
Garuda has yet to announce its 1998 net profit, but insiders estimate a net loss of Rp 400 billion (US$45.5 million).
Company president Abdul Gani said in February the airline was projected to post a net profit of Rp 280 billion in 1999.
Garuda is one of the state-owned companies undergoing an intensive restructuring program launched by State Minister of the Empowerment of State Enterprises Tanri Abeng.
Profitability
The restructuring measures aimed to boost the profitability of state firms and increase revenue for the government in the form of dividends and taxes.
On Wednesday Tanri said the restructuring measures had been successful as net profits from state enterprises, excluding banks and electricity company PT PLN, had surged to Rp 11 trillion in the 1998/1999 fiscal year from Rp 9 trillion in the previous fiscal year.
He declined to disclose the tax contribution from the state enterprises, but said the figure helped compensate for the lower than expected revenues generated by the government's privatization program.
The government did not realize its target of $1 billion from the projected privatization of five state enterprises in the 1998/1999 fiscal year. Cement maker PT Semen Gresik was sold for $121 million and a port container terminal unit of port operator PT Pelindo II raised $215 million, contributing $336 altogether.
Tanri cited bearish market conditions and regulatory hitches as the main reason for the failure of the program.
He said the postponed privatization of several state enterprises in the 1998/1999 fiscal year would be carried out in the current 1999/2000 fiscal year and would aim to raise Rp 13 trillion. (rei/prb)