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Merpati to Begin Auctioning its Assets?

State Owned Indonesian Airline Hopes to Survive as it Faces Growing Debt and Greater Competition.

Bali News:
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An Indonesian State-owned bank - Bank Mandiri has formally asked the State-Owned Airline Merpati Nusantara to begin liquidating assets in order to serve debts owed the bank.

According to a report in the Indonesian-language Bisnis Indonesia, the Airlines indebtedness to Bank Mandiri has now reached Rp. 194 billion (approximately US$19.4 million). The same report states that the Airline had been unable to meet its obligations to the Bank dating from November 2004, incurring Rp. 21 billion (approximately US$2.1 million) in additional interest charges and Rp. 6.2 billion (approximately US$620,000) in late payment penalties.

According to a Vice-Director of Bank Mandiri, I Wayan Agus Mertayasa, the Airline must now sell off some of its assets to meet its obligations while waiting for the Government to make good on its promise to provide much-needed cash injections to the Airline. According to Mertayasa, "We hope that additional operational funds will return Merpati to health and permit it meet its scheduled debt repayments."

While it remains unclear which assets of Merpati are destined to go on block, a process has begun to value the Airline's asset and determine which might best be sold to meet debt while allowing the Company to remain in operation.

Commenting to Bisnis Indonesia, the President Director of Merpati, Hotasi Nababan, refused to detail which assets are likely to be sold, only saying that the process was underway and he hoped the Airline would be allowed to "survive." Blaming his Airline's current unhappy state of affairs on competitive factors, Hotasi refused to provide the press with more details on its debt default or a promised cash injection of Rp. 75 billion (approximately US$7.5 million) from the Government.

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