New Garuda rescue plan seeks $6 billion debt cut

The State-Owned Enterprises (SOEs) Ministry has announced a new plan to save Garuda Indonesia, as the debt-laden national air carrier teeters on the edge of bankruptcy.

The proposal, unveiled by Deputy SOEs Minister Kartika Wirjoatmodjo on Tuesday, entails pressing creditors – including aircraft lessors, banks and business partners – to accept either a haircut or a debt-for-equity swap.

Garuda would issue zero coupon bonds to repay state-owned companies Pertamina, Airnav, Gapura, Bank Mandiri, BRI and BNI and would conduct a debt-for-equity swap to repay state-owned airport operators AP I and AP II.

The two options are also on the table for aircraft lessors, which account for two thirds of the air carrier’s total US$9.8 billion of debt.

Kartika said the plan was expected to cut Garuda’s debt by US$6.09 billion to $3.69 billion, a 62 percent reduction.

“If there is no debt reduction on its balance sheet, [Garuda] will not be able to survive,” Kartika said during a hearing at the House of Representatives.

Garuda shareholders were previously weighing several options to save the company, including bailing it out, restructuring its debt or establishing a new national air carrier.