According to statements made by Garuda Indonesia's (GA) President Director, Indra Setiawan, before Commission IV of the Parliament (DPR), his airline has agreed in principle to convert loans made to Merpati Nusantara Airlines (MZ) equal to Rp. 250 billion (approximately US$ 27.8 million) into mandatory convertible bond (MCB).
Equivalent to a capital investment in the company, the conversion will increase the current 7% stake held by GA in MZ. Just how many shares GA will net from the transaction is open to final negotiation with the Government – the other shareholder in MZ.
As reported at balidiscovery.com, MZ's current balance sheet reflects negative equity with debts totaling more than Rp. 1.3 trillion (approximately US$ 144.5 million) against assets worth only US$ 88.9 million.
Approval for the restructuring of MZ's finances via the conversion of debt to equity must receive final approval from the Agency for State Owned Enterprises (BUMN).
Once approval is in hand, MZ's management will then move forward with plans to find a new investor able to inject the estimated Rp. 1 trillion (approximately US$ 111 million) needed to put the airline on a sound financial footing.
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