Garuda gets creditor nod to restructure $9.6 billion of debt

Creditors gave PT Garuda Indonesia the go ahead on a plan to restructure liabilities worth 142.4 trillion rupiah ($9.6 billion), giving the carrier more financial headroom as it seeks to capitalize on the rebound in international travel.

More than the required two-thirds of creditors agreed to the plan—under which Garuda will issue roughly $800 million of new debt—in a vote in Jakarta court on Friday. The result is set to receive an official stamp of approval on June 20.

Friday’s vote means the state-backed carrier can proceed with the rights issue to raise additional funds that Kartika Wirjoatmodjo, a Deputy Minister of State-Owned Enterprises, already announced.

Like many airlines, Garuda’s business suffered due to the pandemic and the carrier entered a court-supervised debt restructuring process late last year. the carrier’s fleet is now just a fraction of what it was before the Covid-19 outbreak, limiting its ability to generate more revenue.

According to the restructuring plan presented on June 9, holders of the airline’s dollar sukuk would get another sukuk with a 6.5% return. Other terms would apply for banks and lessors.

Boeing Co. isn’t part of the Jakarta restructuring process, but the carrier says it owes the planemaker around $822 million, according to Garuda’s President Director Irfan Setiaputra. That will affect the total amount of new debt issued.

Indonesia’s flag carrier will gradually bring the number of aircraft in operation to 70 for both domestic and international routes, Setiaputra told reporters without naming a time frame. That’s more than twice the number operating earlier this year.

As part of its debt reorganization proposal, Garuda also plans to reschedule the delivery of 13 Airbus A330 aircraft to 2026-2031.