Meetings were held with creditors in November and early December, and the airline says it has asked holders of its floating rate notes to establish an informal committee to represent them. It concedes the move is necessary as it will have trouble paying its debts, and has appointed new financial advisors and lawyers to advise it in discussions with creditors.
“Garuda has commenced discussions with representatives of its major creditor groups regarding principal payments due at the end of the year [2005] and beyond,” says chief executive Emirsyah Satar. “Garuda’s current situation makes payment of such amounts extremely difficult and we are working with our creditors to resolve this in a manner that is fair and equitable to all stakeholders. Garuda will continue to pay regular contractual interest requirements.”
Satar became chief executive early in 2005 after the Indonesian government replaced his predecessor and the airline’s entire board. Soon after taking the job, Satar acknowledged the airline was facing financial difficulty and said he was working on a new long-term business plan.
“Negative factors affecting Garuda’s performance include record fuel prices, the weakening of the rupiah for a company that has rupiah revenue and US dollar expenses, increasing interest rates and events like the Bali bombing in October 2005,” says Satar.
“Garuda’s first priority at this time is our operations and allowing time for working capital to rebuild to support our operations. Maintaining service and ensuring that there is no disruption to our customers is of paramount importance to Garuda.”
Chairman Abdulgani adds: “We plan to pay our trade creditors, including aircraft operating lessors, so that operations can continue and revenue generation is maximised.”
Garuda last restructured its debts in 2001, when it owed creditors a total of $1.8 billion. The debt restructuring mainly covered an extension of the repayment period and the conversion by the Indonesian government of debt into additional equity.
The airline says its total debt now stands at a little more than $800 million, more than $500 million of which is owed to various European export credit agencies. ■
NICHOLAS IONIDES/SINGAPORE
Source: Airline Business
