House approves Merpati lifesaving plan
Rendi A. Witular, Jakarta
The House of Representatives has given approval to the government to restructure troubled state-owned airline PT Merpati Nusantara Airlines in a bid to help prevent the country's second largest air carrier from collapsing.
The restructuring program consists of three parts; debt restructuring, a strategic sale to foreign or local investors, and an initial public offering (IPO).
The House, however, has decided to postpone the divestment program for state-owned Bank Negara Indonesia (BNI), saying it was not crucial at the moment. The decision on what to do next will be left to the incoming House and the government.
During a hearing between the government and the House finance commission on Monday, commission chairman Emir Moeis said that the Ministry of Finance would have to first approve Merpati's business plan before the restructuring programs could be carried out.
"Merpati cannot be restructured unless its business plan is approved by the Ministry of Finance," said Emir during the hearing, which was attended by Minister of Finance Boediono and State Minister of State Enterprises Laksamana Sukardi.
The House said that Merpati's management should first complete the conversion of the company's debt to the government into equity (debt restructuring), saying that this was the most feasible option for the time being.
Darmin Nasution, director general of financial institutions at the Ministry of Finance, said the business plan was needed to ensure that the conversion of Merpati's debt would not cause losses to the state as a result of reckless business operations.
Merpati has Rp 1.3 trillion (US$139.93 million) in debt, and assets amounting to about Rp 775 billion. The airline's major creditors are the government (Rp 225 billion), Bank Mandiri (Rp 230 billion) and national flag carrier Garuda Indonesia (Rp 246 billion).
The government plans to sell around a 49 percent stake in Merpati to strategic investors later this year (or up to a 51 percent stake if the buyers are local investors).
Merpati needs fresh capital to help restore its equity to positive territory, and expand its business amid tough competition in the airline industry. This would eventually boost Merpati's value prior to a planned initial public offering in 2006.
"We have decided to immediately approve the restructuring as part of an attempt to rescue the airline. But we will leave the execution of the restructuring programs to the new government," said Emir.
State Minister of State Enterprises Laksamana Sukardi agreed with Emir, saying that this would help the outgoing government avoid giving rise to suspicions among the public regarding its intentions.
"Morally, the incoming government will enjoy more legitimacy in implementing the restructuring effort," Laksamana said.
Regarding the divestment plan for BNI, both the government and the House said the plan was not urgent at the moment as BNI still had sufficient capital and the government could still find ways to plug the state budget deficit without selling shares in the bank.
The government had initially planned to sell 30 percent of its stake in BNI to the public via a secondary offering.