NusaBali reports that the now-grounded PT Merpati Nusantara Airline (MZ) will not fly again unless its outstanding loans are converted to shares.
According to Dahlan Iskan, the Minister of State-owned Enterprises (BUMN), the government would be wasting its time if it injected funds into MZ if its debt was not first converted to shares.
Clarifying his position, Dahlan added, “For instance, restructuring funds of Rp. 200-400 billion will only allow the airline to fly for a month, and then be grounded again.”
Dahlan says no restructuring fund will be released to MZ when it is still heavily burdened with debt. As a result, Dahlan has asked the commission supervising BUMN at the House of Representatives (DPR) to understand MZ’s current financial position and quickly pave the way for a restructuring of the airline’s debt in order they can resume flight operations.
Through January 2013, Merpati’s debt totaled Rp. 7.6 trillion.
The airline ceased operations in February due to severe cash shortages.
In order for the desired conversion of debt to shares to take place, the Airline’s creditors must agree to the scheme and permission must be given beforehand by the finance commission of the DPR.
Dahlan contends that when the Airline’s debt is converted to shares the balance sheet of Merpati can become positive as its debt will disappear, clearing the way for loans and new investors.
Separately, the CEO of Merpati, Asep Ekanugeraha, cautioned that the conversion of debt to shares must be done soon because the flight operating certificate of the Airline will expire in February 2015. Failure to begin flight operations again before that deadline will cause the Ministry of Transportation to declare the now frozen operating certificates irrevocably suspended.
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