Garuda Indonesia (Persero) Tbk
Garuda Indonesia Confirms Plan to File UK Scheme of Arrangement; Offers New Bond, Equity Conversion Combination for Creditors; Requests $527M Govt Funding for Restructuring; Indonesian Govt Considering Diluting Majority Stake in Carrier
Tue 11/09/2021 20:41 PM
Editor's Note: This story was originally published in the evening of Nov. 9, and has been reissued during normal business hours to reach a wider audience.
Relevant Document:
House Hearing Presentation (Bahasa Indonesia)
Indonesia’s Deputy Minister for State-Owned Enterprises (SOEs) Kartika Wirjoatmodjo told House members at a House hearing today, Nov. 9, that Indonesia’s flag carrier PT Garuda Indonesia Tbk is planning to file a UK scheme of arrangement, on top of the ongoing in-court restructuring (PKPU) in Indonesia, confirming Reorg’s earlier reporting. Additionally, a presentation from the company dated today, Nov. 9, shows new terms of the company’s restructuring proposal for its creditors, along with a $527 million request in government funding for the restructuring. Continue reading for our Asia Core Credit team's reporting on Garuda Indonesia filing a UK scheme of arrangement, and request a trial for access to reporting and analysis on many more corporate restructurings in the region.
During the hearing, Wirjoatmodjo also said that the government is considering diluting its majority stake in the carrier, which currently stands at about 60%.
According to the presentation which Reorg obtained, Garuda is currently in a negative equity position at $2.8 million, which the company has termed “already technically bankrupt”. The current Covid-19 pandemic has also caused the company to take on an additional $100 million to $150 million of debt every month.
Garuda, which has been logging losses since 2017, will therefore have to undergo “massive restructuring efforts” - which is subject to the consent of its lessors, given that 65% of the company’s debt is with them, the presentation states.
Restructuring Plan
During the hearing, Wirjoatmodjo said that the carrier expects to decrease its debt to $3.69 billion from $9.78 billion, through the following restructuring plan, as detailed in the presentation:
The presentation also states that Garuda and its subsidiary PT Citilink Indonesia expect to reduce their aircraft from 202 in 2019 to 134 in 2022, and will reduce the types of aircraft in their fleet to seven, from the initial 13 types. Garuda and Citilink also intend to renegotiate flight rental fees with creditors and are targeting a 40% to 50% decrease in rates from their current values. Come 2026, the carrier is looking to increase its fleet size to 188, in accordance with its route network.
Additionally, Garuda said that it will focus on domestic flight routes along with a number of international routes which will mainly cater for cargo flights, and is also aiming to increase its revenue streams from its cargo business and ancillary services.
Wirjoatmodjo added during the hearing that the carrier will cut its long-haul flights to places like Amsterdam and London, as well as unprofitable routes, such as South Korea.
The slide below shows the expected balance sheet of Garuda - solely for the parent entity - following the restructuring:
*Note: Dalam juta USD = USD millions;
Aset = Asset;
Liabilitas = Liabilities;
Ekuitas = Equity;
Liabilitas lainnya = Other liabilities including tax liabilities, employee payables, unearned revenue, etc.;
Utang lessors = Lessors’ debt
Wirjoatmodjo said during the House hearing that he expects Garuda to receive creditors’ feedback on the proposed restructuring plan in the next two to three months.
Government Funding
Wirjoatmodjo said during the hearing that Garuda is estimated to require up to $527 million from the government for its restructuring in the context of the National Economic Recovery program (IP-PEN), which as detailed in the presentation, comprises:
Should the funds be insufficient, Garuda will also seek additional funding from third parties via a fundraising process, the presentation states.
Wirjoatmodjo said during the House hearing that the $90 million interim funding from the government serves as an indication of its commitment to Garuda’s restructuring, with the amount to be used as cash flow for the carrier during its negotiation process with creditors in the next four to five months. Meanwhile, the remaining $437 million will be disbursed when both Garuda and its creditors come to an agreement on negotiations for the leasing costs and/or debt restructuring, he added.
As reported, the carrier previously obtained liquidity support from the Indonesian government through the export working capital loan facility under the National Economic Recovery program and through the IDR 8.5 trillion ($587.7 million) mandatory convertible bond (MCB) program. IDR 1 trillion of MCBs were issued in February 2021 to fund payment of amounts owed to PT Pertamina.
Wirjoatmodjo said that should the restructuring successfully reduce Garuda’s debt obligations, the government is considering diluting its majority stake in the company.
Financial Performance
According to the company presentation, Garuda had, as at Sept. 30, cash and bank balances of $19 million, as compared with $9.756 billion worth of liabilities in total, including $921 million in bank loans and $1.111 billion of long term loans.
The company had for the month of September recorded total revenue of $51 million, along with an operating loss of $62 million and reported LBITDA of $150 million. For the first nine months of 2021, Garuda reported total revenue of $568 million, while operating loss stood at $731 million and reported LBITDA at $817 million for the period.
The following shows the details of the company’s financials:
Meanwhile, Garuda’s operational performance for the same period is as follows:
-- Sarah Yuniarni, Rae Wee
Relevant Document:
House Hearing Presentation (Bahasa Indonesia)
Indonesia’s Deputy Minister for State-Owned Enterprises (SOEs) Kartika Wirjoatmodjo told House members at a House hearing today, Nov. 9, that Indonesia’s flag carrier PT Garuda Indonesia Tbk is planning to file a UK scheme of arrangement, on top of the ongoing in-court restructuring (PKPU) in Indonesia, confirming Reorg’s earlier reporting. Additionally, a presentation from the company dated today, Nov. 9, shows new terms of the company’s restructuring proposal for its creditors, along with a $527 million request in government funding for the restructuring. Continue reading for our Asia Core Credit team's reporting on Garuda Indonesia filing a UK scheme of arrangement, and request a trial for access to reporting and analysis on many more corporate restructurings in the region.
During the hearing, Wirjoatmodjo also said that the government is considering diluting its majority stake in the carrier, which currently stands at about 60%.
According to the presentation which Reorg obtained, Garuda is currently in a negative equity position at $2.8 million, which the company has termed “already technically bankrupt”. The current Covid-19 pandemic has also caused the company to take on an additional $100 million to $150 million of debt every month.
Garuda, which has been logging losses since 2017, will therefore have to undergo “massive restructuring efforts” - which is subject to the consent of its lessors, given that 65% of the company’s debt is with them, the presentation states.
Restructuring Plan
During the hearing, Wirjoatmodjo said that the carrier expects to decrease its debt to $3.69 billion from $9.78 billion, through the following restructuring plan, as detailed in the presentation:
| Creditor | Restructuring Proposal | Debt reduction |
| Tax debt and employees | Gradual repayment | 0% |
| Secured creditors | Through collateral settlement | 0% |
| MCBs | Conversion into equity | 0% |
| State-owned lenders, Pertamina, Airnav and Gapura | Zero-coupon bond (ZCB) issued by Garuda | [70-85]% |
| Sukuk holders, KIK EBA, LPEI and private lenders | New coupon bond and equity in Garuda | [70-85]% |
| Angkasa Pura (AP) 1, Angkasa Pura (AP) 2, and vendors | New coupon bond and equity in Garuda | [70-85]% |
| Claims from lessors | New coupon bond and equity in Garuda | [70-85]% |
| Canceled aircraft purchases | New coupon bond and equity in Garuda | [70-85]% |
The presentation also states that Garuda and its subsidiary PT Citilink Indonesia expect to reduce their aircraft from 202 in 2019 to 134 in 2022, and will reduce the types of aircraft in their fleet to seven, from the initial 13 types. Garuda and Citilink also intend to renegotiate flight rental fees with creditors and are targeting a 40% to 50% decrease in rates from their current values. Come 2026, the carrier is looking to increase its fleet size to 188, in accordance with its route network.
Additionally, Garuda said that it will focus on domestic flight routes along with a number of international routes which will mainly cater for cargo flights, and is also aiming to increase its revenue streams from its cargo business and ancillary services.
Wirjoatmodjo added during the hearing that the carrier will cut its long-haul flights to places like Amsterdam and London, as well as unprofitable routes, such as South Korea.
The slide below shows the expected balance sheet of Garuda - solely for the parent entity - following the restructuring:
*Note: Dalam juta USD = USD millions;
Aset = Asset;
Liabilitas = Liabilities;
Ekuitas = Equity;
Liabilitas lainnya = Other liabilities including tax liabilities, employee payables, unearned revenue, etc.;
Utang lessors = Lessors’ debt
Wirjoatmodjo said during the House hearing that he expects Garuda to receive creditors’ feedback on the proposed restructuring plan in the next two to three months.
Government Funding
Wirjoatmodjo said during the hearing that Garuda is estimated to require up to $527 million from the government for its restructuring in the context of the National Economic Recovery program (IP-PEN), which as detailed in the presentation, comprises:
- $90 million interim funding in the form of a senior secured loan (with a guarantee of 120% of the loan amount) from the Ministry of Finance (in progress)
- Additional funding of up to $437 million to be used as funds following the completion of the restructuring
Should the funds be insufficient, Garuda will also seek additional funding from third parties via a fundraising process, the presentation states.
Wirjoatmodjo said during the House hearing that the $90 million interim funding from the government serves as an indication of its commitment to Garuda’s restructuring, with the amount to be used as cash flow for the carrier during its negotiation process with creditors in the next four to five months. Meanwhile, the remaining $437 million will be disbursed when both Garuda and its creditors come to an agreement on negotiations for the leasing costs and/or debt restructuring, he added.
As reported, the carrier previously obtained liquidity support from the Indonesian government through the export working capital loan facility under the National Economic Recovery program and through the IDR 8.5 trillion ($587.7 million) mandatory convertible bond (MCB) program. IDR 1 trillion of MCBs were issued in February 2021 to fund payment of amounts owed to PT Pertamina.
Wirjoatmodjo said that should the restructuring successfully reduce Garuda’s debt obligations, the government is considering diluting its majority stake in the company.
Financial Performance
According to the company presentation, Garuda had, as at Sept. 30, cash and bank balances of $19 million, as compared with $9.756 billion worth of liabilities in total, including $921 million in bank loans and $1.111 billion of long term loans.
The company had for the month of September recorded total revenue of $51 million, along with an operating loss of $62 million and reported LBITDA of $150 million. For the first nine months of 2021, Garuda reported total revenue of $568 million, while operating loss stood at $731 million and reported LBITDA at $817 million for the period.
The following shows the details of the company’s financials:
Meanwhile, Garuda’s operational performance for the same period is as follows:
-- Sarah Yuniarni, Rae Wee
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