Govt approves Garuda debt-restructuring plan
JAKARTA (JP): The Financial Sector Policy Committee (FSPC) approved on Thursday the proposed restructuring of some US$1.2 billion debt owed by national flag carrier Garuda Indonesia to various domestic and international creditors.
"Garuda's debt restructuring proposal has been approved by the FSPC," Garuda president Abdul Gani told reporters following a meeting with the FSPC, which groups several senior economic ministers.
Gani said that the government had given the green light for the state-owned Bank Mandiri to partly guarantee the airline's US$610 million foreign debt to the European Credit Agency (ECA), a consortium of lending institutions from Germany, France and Britain.
"Bank Mandiri will provide risk participation of $100 million," he said.
Gani explained that the ECA had demanded that one of the country's state banks partly guarantee Garuda's debt as a precondition for agreeing to the debt-restructuring proposal.
He said that with the Bank Mandiri risk participation, ECA would agree to reschedule the debt repayment term from 12 years to 16 years.
He said that Garuda took the ECA loan when it leased six Airbus 330-300s.
Gani said that the FSPC had also approved the restructuring of Garuda's $103 million debt owed to Bank Mandiri by converting the loan into five-year bonds bearing a coupon rate of 4 percent.
He added that the restructuring proposal for $38 million in debt owed to the state-owned airport operators PT Angkasa Pura I and PT Angkasa Pura II had also been approved.
Under the proposal, Garuda would issue further five-year convertible bonds.
Gani, however, said that a restructuring of Garuda's $9 million debt to the government had yet to be approved.
"We still have to talk to the Finance Minister on the possibility of converting the debt into bonds," he said.
Gani said that the FSPC had also approved the proposed restructuring of $460 million in debt owed to various other parties.
He said that most of the debts were in the form of commercial paper. Garuda has proposed to reschedule the coupon payment to eight years.
Elsewhere, Gani said that Garuda was expected to book $58 million in profit after tax this year, and $108 million in 2001.
"That's based on our business plan," he said.
Garuda has been badly hit by the country's economic crisis that started in the middle of 1997 as its passenger load factor plunged and U.S. dollar-based debt ballooned with the sharp depreciation of the rupiah against the dollar.
Gani said earlier this year that the economic crisis had caused the airline to suffer a negative equity of $310 million.
Garuda had to painfully restructure its debt, finances and operations in a bid to avoid bankruptcy.
The restructuring of the country's corporate debt is seen as a major factor in reviving confidence in the economy and restoring credit lines to the real sector both from domestic and international banks.
So far, only a few major debt restructuring deals have been hammered out.
The Jakarta Initiative Task Force (JITF) has just recently helped facilitate a debt restructuring deals worth $1.2 billion including debt owed by the Bakrie and Brothers conglomerate.
The government has promised to provide tax breaks to cooperative debtors if they restructure their debts through the offices of the JITF. (rei)