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Garuda Delays its Public Offering

Garuda IPO Now Set for February 2010 in Order to Raise US$300 Million.

(9/28/2010) The Indonesian national carrier Garuda Indonesia (GA) is postponing its planned public offering of shares from December 2010 until February 2011, claiming financial auditors need more time to complete their work.

Quoted in Kompas, the Chief Operating Officer of GA, Emirsyah Satar, said on Thursday, September 23, 2010: "If we are to achieve the targeted listing in December 2010, financial audit reports must be completed by the middle of September 2010. In fact, the auditors still need a minimum of two month more."

Emirsyah delivered the announcement on a delay in the initial public offering (IPO) at a special joint press conference attended by Garuda together with the Chief Director of PT Bahana Securities, Eko Yuliantoro; and the Chief Operating Officer of Deloite Indonesia, Osman Sitorus.

Although the delay in the IPO is tied to the preparation of financial audit reports, Emirsyah took special pains to tell the press that there is no problem with Garuda's financial position.

"We are transparent. There is no white-washing of the financial reports for the subsidiaries of Garuda. All our subsidiaries are also reporting profits," explained Emirsyah.

The chief executive of PT Bahana Securities, Eko Yuliantoro, told the press that Garuda is a large company, saying, "there are some 15,000 employees and this is a mid-year audit, not a year-end audit, which requires some extra work."

Eko said that the registration of the IPO will be done with the Indonesian Capital Market Supervisory Agency (BAPEPAM) in November 2010.

Emirsyah explained that all the procedures for the IPO must meet global capital market requirements as the airline's shares will be offered to both local and international investors. Among those regulations is the requirement for a current financial report reflecting the airline's status cannot be older than 135 days at the actual date of the IPO. In this instance, Garuda's financial statements as of September 30, 2010, will be used for the planned February offering.

A Problem of Timing

Eko views the decision to delay the IPO as most timely. "If we conduct a 'road show' on December 15, 2010, the investors will not be available because some will be taking their year-end holiday," said Eko.

Eko went on to explain that the planned "road show" would be conducted one week after the year-end holidays, adding: "We think the road show will take two weeks. First, a presentation for the Indonesian market, followed by presentations in Asia such as Singapore and Hong Kong, then continuing on to America and Europe."

The exact amount of shares that Garuda will offer to the public remains clouded in mystery. Emirsyah refused to be pinned down on that point during the Jakarta press conference.

The concept widely discussed in the press was that Garuda would release 40% of its total shares in the hopes of raising US$300 million in cash, an amount equivalent to Rp. 2.7 trillion at an exchange rate of Rp. 9,000 to US$1.

Emirsyah underlined that the delay in the IPO will not disturb the working capital of the airline, as the delay will only represent a postponement in new cash infusions by several weeks.

The Garuda Fleet

In July 2010 during the Farnborough Air show in London, Garuda announced the purchase of six Airbus 330-200 aircraft slated for delivery in Q4 2012. Current plans call for the Indonesian carrier to have a total fleet of 116 planes by 2014.

The current armada of Garuda numbers 81 planes comprised of Boeing 737-800 NG (37); Airbus 330-300 (6); Airbus 330-200 (4); Boeing 747-400 (3); Boeing 737-500 (5); Boeing 737-400 (17); and Boeing 737-300 (9).