Garuda Indonesia to postpone refinancing fundraising

posted on 6th January 2020 by William Hayes
Garuda Indonesia to postpone refinancing fundraising

Flag carrier Garuda Indonesia has put on hold its intentions to raise funds (of an amount totalling $900 million), intended as a means of refinancing its debt.

It has put the reason for this delay down to the probability that its financial results for the year will not be available in time for an extraordinary general meeting (EGM) scheduled for 22 January.

Commenting on the delay in its financing plans, Garuda states that “the company is studying alternative funding options to ensure that it can realise its goals of refinancing debt that is due within one year, while also complying with applicable regulations”.

Earlier in December, Garuda called for an EGM to be held this month, with the sole aim of seeking shareholder approval for fundraising plans through three options: a global sukuk issuance, a private placement, or peer-to-peer lending.

The exercise would allow the carrier to maintain cash flow for operating activities, remain a going concern, improve its performance and operational certainty, among other benefits. It would also be able to make payment promptly, increasing the level of trust creditors have in the company.

The global sukuk issuance was to raise up to $750 million, which Garuda said will either refinance a similar sukuk issued in 2015 and due for redemption in June 2020, or clear debts with a one-year repayment term.

Via the private placement option, it was looking to raise around $750 million at an interest rate still under negotiation with potential financiers. It did not specify what the funds will be used for.

The carrier also indicated plans to raise around $500 million via peer-to-peer lending, and the funds will go towards repaying debts due within a year. The only guarantee provided for this option is a standby letter of credit with a one-year term, covering 20% of the transacted value.

Total funds raised would not exceed $900 million, Garuda said then, as the amount is well above its total equity of $730 million.