Garuda sign debt restructuring deal

PT Garuda Indonesia, the Indonesia's flagship carrier, has signed a deal with lenders to restructure almost $500 million in debt. The deal paving the way for Garuda to raise US$300 miliion until US$400 million in an initial public offering.

European Export Credit Agencies (ECA) including Compagnie Francaise d Assurance pour le Commerce Extrieur and Germany Euler Hermes, owed about $288 million in unpaid loans, agreed to extend maturities to mid-2016 and be repaid in installments of between $45 million to $60 million a year.

Garuda plasn to use money from IPO to pay for new planes, fly to more destinations and improve maintenance standards. The end of the five-year debt restructuring exercise also opens the door to cheaper loans from domestic banks, allowing growth in a region that overtook North America last year as the world's biggest aviation market, according to the International Air
Transport Association.

When the company started this restructuring process in 2005 the outstanding debt was about $866 million, today its down to $477 million.

The share sale may raise $300 million to $400 million and see about 30 percent of the company sold to the public. PT Mandiri Sekuritas, PT Danareksa Sekuritas and PT Bahana Securities will help arrange the sale while Citigroup Inc. and UBS AG have been hired as international sales agents.

Debt restructuring talks have been taking place since 2005. In October last year, the carrier restructured $76 million of debt owed to PT Pertamina, Indonesia' s state oil and gas
company.

In December 2009, Garuda it agreed with PT Bank Mandiri to convert 967 billion rupiah of debt into a 10.61 percent equity stake. In January, the company won bondholder permission to
restructure $122 million of floating-rate notes.

The agreement in London and subsequent share sale will make it easier for the company to fly to new destinations. Garuda flies to 19 international destinations and 31 domestic destinations according to its website, and expects to expand to have about 120 planes by 2014, from 84 currently.

Garuda was ordered six Airbus SAS A330s in July, worth $1.15 billion at list prices, and has firm orders for 10 Boeing Co. 777 twin-aisle aircraft and 25 Boeing single-aisle 737.