Merpati struggling to repay its debt

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.