Garuda Indonesia confronts stock delisting and creditors

Less than two weeks after Garuda Indonesia (GA, Jakarta Soekarno-Hatta) was granted creditor protection, the Indonesia Stock Exchange warned in a statement on December 20 that shares in the embattled flag carrier may be delisted. The bourse had already suspended trading in the shares in mid-June after it defaulted on its USD500 million global sukuk.

Delisting may occur, the stock exchange said, if a company is “experiencing a condition, or event, which significantly negatively affects the business continuity of the listed company, either financially or legally, […] and the company cannot show indications of significant adequate recovery.”

It can also occur in connection with stock that has not been traded for 24 months. Garuda Indonesia shares have been suspended now for six months, and the suspension period will reach 24 months on June 18, 2023, the bourse clarified.

The airline acknowledged the possibility of a delisting and said it was “focussed on accelerating our performance recovery” through its restructuring, “so that later Garuda shares can be traded as usual.”

Garuda Indonesia embarked on its first meetings with creditors on December 21, its director of finance and risk management Prasetio told reporters and investors the day before, explaining that a number of options in its “peace proposal” had been prepared, the newspaper Media Indonesia reported. It has been given 45 days to complete the negotiations with vendors, suppliers, bond and sukuk holders, and other creditors under the Debt Payment Obligation Postponement (Penundaan Kewajiban Pembayaran Utang – PKPU) process.

“The options that will be offered in the restructuring include settlement with zero-coupon bonds, new debt securities, and the issuance of new shares in accordance with capital market protocol rules,” he said in the virtual conference.

The carrier is in constant communication with a team of financial consultants who the panel of judges had appointed, he added. Creditors have until January 5 to submit invoices for their claims, and meetings to verify the claims will be held on January 19. On January 20 and 21, the judges will decide on whether to accept the restructuring or whether to extend it. The maximum time limit for a PKPU case is 270 days, or nine months.

Prasetio reiterated that Garuda Indonesia’s debt totals USD9.8 billion, owed to around 800 creditors and lenders. Its latest financial statements revealed a USD1.66 billion loss for the first nine months of 2021, worse than the USD1 billion loss it posted for the same period last year.

CEO Irfan Setiaputra said at the same event that Garuda Indonesia would drive greater efficiency in its operations in 2022, the news site Kumparan reported.

“We are optimising the network and will only operate routes that generate very clear profitability. The initial focus is on domestic routes, while our international routes will be focussed more on cargo,” he explained, adding that the number of aircraft will be adjusted accordingly. “The simpler the number of aircraft and types of aircraft, the easier and more efficient it is to operate.”

Garuda will continue to renegotiate its contracts with lessors to try to agree on “a variable cost operation scheme.” Three things will define the business plan next year, he declared: simplicity, profitability, and full service. As for cargo and export, Setiaputra said the airline will work to raise capacity on “five special routes” namely Manado-Tokyo Narita, Makassar-Singapore Changi, Denpasar-Hong Kong Int’l, Juina-Hong Kong, and Makassar-Hong Kong.