Govt approves Garuda debt-restructuring plan

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)