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Garuda FRN buyback flops as IPO looms
State airline company PT Garuda Indonesia failed Tuesday to make an offer to buy back floating rate notes (FRN) from bondholders, after the required number of investors failed to attend a meeting in Singapore
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tate airline company PT Garuda Indonesia failed Tuesday to make an offer to buy back floating rate notes (FRN) from bondholders, after the required number of investors failed to attend a meeting in Singapore.
The meeting, hosted by law firm K&L Gates LLP., was only attended by bondholders representing about 60 percent of the unredeemed notes due in 2007. A quorum of at least 75 percent was required before the meeting.
The failure indicates a preference among investors to stick to the existing FRN contract, which means full payment of the debt and interests, as well as the execution of penalties involved.
Garuda spokesman Pudjobroto confirmed the failure, but declined to comment on why some of the bondholders refused to hear the company’s offer.
“The meeting will be rescheduled to Jan. 11, still in Singapore,” he said.
Garuda is required by its shareholders to restructure its liabilities prior to entering the bourse.
State SOE Minister Mustafa Abubakar said Tuesday the initial public offering of the state company would be carried out in the second half of next year.
The company initially allocated US$25 million for the planned repurchases and provided bondholders with an opportunity to tender their notes at a discounted rate.
“The buyback will give more benefits to bondholders,” said Garuda president director Emirsyah Satar.
He added the buyback was an important step in completing Garuda’s debt restructuring, as it would provide long-term stability for the airline’s operations and the repayment of the notes.
Garuda currently owes $305.2 million and Rp 366.2 billion worth of FRN due in 2007.
Even with the company now forced to postpone the meeting to buy back its FRN, Pudjobroto said it had no plan to postpone selling its stake through an Initial Public Offering (IPO) in 2010.
“We’re still preparing the Garuda IPO,” he said.
Garuda plans to sell a 40 percent stake through the IPO, expecting to bring in $300 million to $400 million in proceeds.
The company had been set for the IPO this year, but had to restructure its debts first.
It will spend $100 million next year as part of its five-year expansion plan, aimed at increasing its fleet from 67 aircraft to 116 by 2014, to serve 27 million passengers, up from 10.1 million recorded in 2008.
Garuda remains confident it will be able to achieve its operational targets and make Rp 3.75 trillion ($397.5 million) in profits by 2014.
In 2008, the airline booked Rp 669 billion in profits, out of total revenue of Rp 19.4 trillion.
For 2009, Garuda has set a minimum 10 percent growth target in net profits compared to a year earlier.
In the first half of the year, net profits stood at Rp 612 billion.
