Merpati struggling to repay its debt
Debbie A. Lubis, The Jakarta Post, Jakarta
Faced with continuing financial difficulties, PT Merpati Nusantara Airlines plans to issue medium-term notes worth Rp 300 billion to repay its debts, pending government approval.
Merpati's controller and insurance and tax manager, Setyo Wisnubroto, told The Jakarta Post on Wednesday the company submitted a proposal on the issuance of the notes to the Office of the State Minister of State Enterprises in January this year, but had yet to receive a response.
Merpati's debts to the Indonesian Bank Restructuring Agency (IBRA), totaling Rp 331 billion, will mature on April 11.
Setyo said the airline had attempted to secure financing from banks and non-bank financial institutions to repay the debts, but to no avail.
"We have no money to repay the debts. So this plan to issue notes is the only way out. We are still awaiting the approval of the government," he said.
Officials at the state minister's office were unavailable for comment.
Merpati has appointed Mandiri Securities to arrange the issuance of the notes.
According to Setyo, IBRA promised to grant the airline a generous debt haircut of up to Rp 230 billion, provided that Merpati could settle the rest of the debt, or Rp 101 billion, on time.
If the company is unable to meet this requirement, the debt restructuring deal will be canceled and negotiations with IBRA will begin again.
Merpati, 93.5 percent owned by the government and 6.5 percent owned by national flag carrier Garuda Indonesia, has been in financial difficulties since 1998.
The airline was forced to take the step of returning three of its 14 locally assembled CN-235 fixed-wing aircraft to state aircraft manufacturer PT Dirgantara Indonesia, to settle its debts with the company.
In addition, it has grounded its 11 CN-235 aircraft due to decreasing loads, increased competition and economic woes.
The company booked a pretax loss of Rp 50 billion last year, up from a pretax loss of Rp 187.9 billion in 2000.
It booked a pretax profit of Rp 72 billion in 1999, an improvement from a huge pretax loss of Rp 657.7 billion in 1998.
The present value of the company's total assets is approximately Rp 900 billion.