20-Dec-2010 9:41 AM

Garuda wraps-up restructuring, eases way for IPO

Garuda Indonesia announced (20-Dec-2010) it has wrapped up its financial restructuring with all creditors, including European Export Credit Agency (ECA). The commercial lenders signed an agreement for the remaining debt of USD277 million. Since 2005, Garuda's total debt has decreased significantly from USD868 million to USD464 million on Nov-2010, due to a combination of payment, debt buy-back and equity conversion. The last part of USD464 million, was signed on 17-Dec-2010 in an amount of USD277 million and restructured until 2016. The debt was used to fund the six A330-300s in 1996. President and CEO Emirsyah Satar stated the credit agencies agreed for the maturities to be repaid in instalments of between USD45-60 million p/a (Bloomberg, 17-Dec-2010). According to Mr Satar, the wrap-up of the financial restructuring is an important milestone for Garuda and will speed the development of the carrier, especially in terms of its IPO. The agreements will allow Garuda to launch its IPO in 2011, while also allowing access to cheaper loans from domestic banks. Mr Satar added the IPO will allow it to launch services to new destinations in India and Europe. He stated demand on its Amsterdam route is “quite stable”. The CEO also said he does not expect profit to increase as much as originally expected this year due to investments in new aircraft and routes. [more]

Indonesia House of Representatives has meanwhile asked Garuda to improve its performance before launching its IPO next year so that it will receive a good price for its shares (ANTARA News, 17-Dec-2010). Garuda expects to be listed on the Indonesia Stock Exchange from 11-Feb-2011.

Garuda Indonesia: “If by early February everything goes smoothly and we’re listed, I’ll be one of the happiest people. It’s important we IPO because of Garuda’s legacy. Come February, we’ll be transparent and we’ll have the systems in place to grow sustainably. We’ve targeted London, Frankfurt, Paris and Rome but Europe is a little slack at the moment and the growth is not there. This year we’ve invested in new aircraft and new routes and when you expand, you don’t immediately produce the bottom line. We did that deliberately because if you don’t invest, in coming years there’s not the capacity to expand,” Emirsyah Satar, CEO. Source: Bloomberg, 17-Dec-2010.

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