Battle Garuda vs Mandiri

PT Bank Mandiri Tbk said the conversion of mandatory convertible bond (MCB) worth IDR1.01 trillion as the shares of PT Garuda Indonesia will jump sharply into 28.8 percent as of 10.6 percent.
The calculation refers to the MCB conversion worth IDR1.01 trillion plus internal rate or return (IRR) into IDR3.36 trillion.
Based on Bank Mandiri calculation, there are two scenarios of stock conversion. First, Garuda MCB outstanding debt worth IDR1.01 trillion plus IDRR18 percent with flat ratet turned into IDR2.39 trillion so the stock conversion become 22.27 percent.
Second, Garuda MCB outstanding debt of IDR1.01 trillion plus IRR18 percent with floating rate, thus the total obligation becomes IDR3.36 trillion and Garuda stock conversion become 28.8 percent.
The calculation of two options here refers to Garuda scheme to have initial public offering (IPO) in 2010.
Asset management director of Bank Mandiri Abdul Rachman said the management currently uses a calculation of Garuda debt worth IDr3.36 trillion as it refers to IRR 18 percent.
“The debt rose triplet as the IRR 18 percent coupon is not paid and thus the interest keeps growing. Based on the main covenant plus the growing interest, as we also pay the customers interest,” he said last week.
However, President Director of Garuda Emirsyah Satar declined the figure.
“The conversion to Garuda shares only stands at 10.6 percent. The interest obligation is not our responsibility,” he said last week.
The MCB credit was formerly deemed the loan for working capital and Bank Mandiri promissory notes to Garuda. In 2001, Garuda restructured its debt including the loan conversion into MCB with five years tenure and coupon of 4 percent.
The settlement of MCB comes from the Garuda IPO scheduled in 2003. MCB Garuda is deemed running well due to the government guarantee to BI for three years.
But, Garuda finance condition worsened so if failed to perform IPO despite the collateral due date of 2004 and not extendable so that MCB is deemed default.