Indonesia’s national carrier Garuda Indonesia is likely to seek suspensions of its debt payments to avoid bankruptcy under a standstill agreement with the creditors. Indonesia’s deputy minister of state-owned enterprises (SOEs), Kartika Wirjoatmodjo, told a parliamentary hearing that the pandemic had adversely affected the company’s finances and resulted in a negative cash flow of ~$100mn/month. Thus, the carrier needs a restructuring to lower its debt from $4.5bn to ~$1bn-1.5bn. He said, “We are appointing legal and financial consultants to begin this process and we must immediately conduct a moratorium (of debt repayments) or a standstill in the near term,” while adding “Because without a moratorium, it will run out of cash in a very short time”. The minister also indicated that a failure to conclude restructuring could lead to a bankruptcy. According to Bloomberg, the company has deferred a June 3, 2021 distribution on its 5.95% 2023s dollar sukuk by 14 days to consider strategic alternatives. The airline was previously provided with a government bailout through the sale of IDR 8.5tn ($594mn) convertible bonds in 2020. It had also extended the maturity of its sukuk due last June by three years.
Garuda’s 5.95% 2023s were down 2.05 points to trade at 72 cents on the dollar on the secondary markets, down from 88 levels in the second half of April.