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Mandiri Bank to Get its Slice of Garuda

Debt for Equity Swap will Remove US$103 Million in Debt from Garuda's Books.

(9/28/2009) Bank Mandiri will soon convert it US$103 million outstanding debt owed by Garuda Indonesia into an 11% share in the national carrier.

As reported by Bisnis Indonesia, the decision to liquidate the bank's debt was arrived at after extended negotiations between the bank and the carrier.

Once the outstanding debt of the airline is converted into an equity share Bank Mandiri will be issued 11% of the airlines stock when the national carrier's initial public offering (IPO) takes place in 2010.

Negotiations between the airline and the bank on how to handle the US$103 million in debt have consumed the past 8 years.

Assuming the debt restructurization with Bank Mandiri is successful, Garuda will still have an outstanding long-term debt of US$370 million due to its European creditors.

Garuda's financial fortunes are on the upswing, recording a profit of Rp. 60 billion (US$600,000) in 2007; Rp. 669 billion (US$6.69 million) in 2008; and Rp, 612 billion (US$6.12 million) through the end of June 2009. The airline is targeting revenues of Rp. 22.31 trillion (22.31 billion) for all of 2009, an increase of 15% compared to the previous year. If current trends continue, Garuda should yield a profit of Rp. 3.7 trillion (US$3.7 billion) in 2014.

Garuda hopes to net US$400 million via an IPO of 44% of its shares to the marketplace in 2010.