Garuda Indonesia eyes rights issue after deal with creditors

PT Garuda Indonesia plans to raise money via a two-stage rights issue, as the indebted airline looks to salvage itself. After the carrier and its creditors come to agreement on its debt, the Indonesian government will inject 7.5t rupiah ($520m) via a first rights issue, Deputy Minister of State-Owned Enterprises Kartika Wirjoatmodjo told a parliamentary hearing Tuesday. The announcement comes just days before a scheduled key meeting in Jakarta, to decide how much of a haircut gets imposed on holders of its debt. Creditors are then expected to vote on the carrier’s $9.8b restructuring plan later this month. The debt restructuring of the ‘technically bankrupt’ carrier is becoming a test of how far Indonesia’s government will go to rescue a state-owned company. Like many airlines, its business suffered due to the pandemic. Garuda said earlier in the year that it wanted investors to take a haircut of 81 cents on the dollar for their debt. Failure to reach an agreement with creditors within the 270-day limit stipulated by law would put Garuda in liquidation. That could hurt the country’s tourism industry. Garuda is running on roughly 20% of its pre-pandemic fleet, curbing its ability to generate operating income. Wirjoatmodjo said the second rights offering will be conducted early in Q4 to allow strategic investors to buy a stake in the carrier. The government plans to keep a 51% share, he said.<br/>