Garuda Indonesia plans to raise $800m in bonds to avoid bankruptcy

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JAKARTA — Garuda Indonesia on Thursday presented a proposal that includes issuing $800 million in new bonds as the pandemic-hit national airline tries to restructure to get out of billions of dollars in debt and avoid bankruptcy.

The struggling flag carrier also said it would raise $330 million by issuing shares to non-shareholder creditors, according to the proposal it presented to a court in Jakarta.

The airline negotiated with creditors in a restructuring process known as PKPU, which was granted in December after a local information technology company sued it for unpaid debts.

Garuda’s lenders and creditors are due to vote on the proposal on Wednesday. The airline must receive the approval of two-thirds of each class of creditors or it will go bankrupt.

“We are at the point where we are officially presenting the restructuring proposal,” CEO Irfan Setiaputra told reporters, adding that all creditors had obtained it.

Setiaputra said in December the company was $9.8 billion in debt to some 800 creditors and lenders.

Under the announced plan, some creditors would be required to take a substantial haircut on what is owed to them, but public and private banks, state oil company Pertamina and other public entities would receive full repayment, albeit on a schedule. adjusted reimbursement.

Trading in Garuda shares has been suspended since June last year after the airline failed to pay coupons on a $500 million Islamic bond.

Garuda, like other airlines around the world, has been hit hard by the coronavirus pandemic which has drastically curtailed air travel. Among the measures Garuda has touted to revive his fortunes are cutting the number of planes as well as routes. It has also worked to reduce aircraft rental costs by negotiating with lessors.

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