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Garuda Moves Ahead with IPO

25% of Indonesian National Carrier on Sales as Garuda Restructures its Finances.

(1/20/2010) The Indonesian government has confirmed that the national airline PT Garuda Indonesia will offer up to 25% of its shares via am initial public offering scheduled for Q2 of 2010.

To this end, an underwriter has been appointed by Garuda.

The Minister for State-Owned Enterprises, Mustafa Abubakar, told Bisnis Indonesia: "25% of Garuda shares will be released to the market. The funds will be used to pay for the expansion of the company. The entire process is now underway including the appointment of an underwriter."

Mustafa did not, however, explain if the Garuda shares held by Bank Mandiri would form part of the 25% block of the airline's shares offered to the public.

The Minister confirmed that Garuda and PT Krakatau Steel will hold initial public offerings (IPO), following an IPO for the state-owned PT Pembangunan Perumahan which operates in the public housing sector.

The 25% share of the national airline is less than the 49% initially proposed for public ownership.

The CEO of Garuda, Emirsyah Satar, told the press that nearly 100% of Garuda's debtors have accepted and agreed to the financial restructuring of the airline, including the acceptance of two floating-rate note valued at US$305.27 million and Rp. 366.28 billion.

Quoted recently by Bloomberg Business News, Eddy Porwanto, the Financial Director of Garuda, said that the airline would purchase back debts totaling US$122 at a discounted price of US$0.70 to the dollar. He added: "Garuda also plans to purchase back Rp 146.4 billion in obligations."

The reduction of debt loads and the overall financial restructuring of the airline are intended to ease the public offering of shares to take place before mid-2010.

The restructuring of the airline's debt also includes provisions to extend due dates on current debt to January 2018 and an increase in interest rates of 1.75% over the London Inter Bank Offered Rate (LIBOR) on its U.S. dollar denominated loans.

Garuda has also successfully renegotiated its outstanding debt with the State oil company Pertamina, and the State-owned Airport Authorities (Angkasa Pura I & II).

The Indonesian state-owned airline has also converted Rp. 967 billion in debt owed to Bank Mandiri into 10.61% of the company's shares.