House approves Merpati's $26.47 debt swap
House approves Merpati's $26.47 debt swap
Tony Hotland, Jakarta
The House of Representatives has approved the conversion of Rp
225 billion (US$26.47 million) debt owed by state-owned PT
Merpati Nusantara Airlines to the government into equity, paving
the way for the company's plan to privatize.
However, House Commission IV overseeing transportation and
communications insists that the privatization be executed after
the company restructures its business and debts to assure its
soundness.
"Restructuring the company and its debts is essential in such
a huge move like privatization so that Merpati's shares are not
acquired under their real value," commission member Enggartiasto
Lukito said during a hearing with the airline's management on
Tuesday.
Merpati's president director Hotasi Nababan said that his
management had been taking restructuring steps since last year by
offering more flights and restructuring its human resources.
"However, we'll discuss further actions with a special team
formed by Commission IV. We'll also discuss the method for
recapitalization; whether through a rights issue or injecting
government funds," he said.
With a rights issue, Merpati expects to secure at least Rp 1
trillion. This fund, said Hotasi, could help the airline recover
financially and allow a profitable initial public offering.
"The funds will be used to finance new aircraft and to improve
our service and productivity," he said.
Hotasi said the conversion of the debts into equity could
hopefully trigger other creditors to do the same thing and would
accelerate the company's debt restructuring.
He said that the privatization was actually crucial for
Merpati considering the company's worsening financial state and
tougher competition in the airline industry with the emergence of
companies offering much lower fares.
"Privatization is important for us to get fresh funds in order
to tackle current deficiencies we're having that are hampering us
from expanding," he said.
By the end of 2003, Merpati incurred about Rp 1.3 trillion in
debts, with assets standing at a mere Rp 800 billion. Its market
share dipped to 18 percent from 41 percent in 1993.
Although the House has yet to give the green light for
privatization, Hotasi expects the whole process of
recapitalization to be completed before the end of the year to
benefit from the rising airline industry.
The number of plane passengers surged to 17.5 million last
year from 12.3 million in 2002, and is projected to reach 20.5
million in 2004.
The commission also asked the company's management to submit
the amount of funds it needs for restructuring to the government
and to report the progress to the commission.