TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Garuda now able to pay dividends
National flag carrier PT Garuda Indonesia (GIAA) is now able to pay dividends to its shareholders after it decided to conduct a prepayment of its debts, which restricted the airline from paying dividends for many years
Change Size
N
ational flag carrier PT Garuda Indonesia (GIAA) is now able to pay dividends to its shareholders after it decided to conduct a prepayment of its debts, which restricted the airline from paying dividends for many years.
Garuda Indonesia president director Emirsyah Satar confirmed Tuesday that the repayment had also set the company free from the Export Credit Agency (ECA) and Commercial Lenders (CL) covenant that prevented it from disbursing dividends to its shareholders.
'Yes, [Garuda is] now allowed [to disburse dividends],' he wrote in a text message.
Garuda has not paid dividends, despite booking net profits each year since going public in 2011. The company's 2011-2013 annual reports showed that its bottom line stood at Rp 805.53 billion (US$67.18 million) in 2011, $110.6 million in 2012 and $11.04 million in 2013.
Garuda spokesman Pudjobroto, who goes by one name, said that the airline had used its internal funds to carry out the early payment of its debts. 'However, we will still need to obtain shareholders' approval via a general shareholders' meeting to disburse the dividends,' he said.
In a disclosure submitted to the Indonesia Stock Exchange (IDX) on Tuesday, Garuda said it had carried out a 'voluntary prepayment' on its combined $62.5 million ECA and CL loans on Monday.
The airline obtained the loans in 1996 from a syndication of 15 banks, including the UK's Lloyds Bank plc and France's BNP Paribas and Crédit Agricole Corporate and Investment Bank.
The loans were then rescheduled as part of Garuda's debt restructuring agreement in 2010 after it became entangled in financial difficulties, triggered by the 1997-1998 economic crisis.
The early repayment enabled the airline to reacquire its cash and maintenance reserve collateral, worth $14 million, and to regain ownership of six Airbus 330-300 aircraft, which were used as underlying assets during the lending period, according to the statement.
By the end of March 2014, Garuda's ownership structure saw the government with a 69.1 percent stake; Credit Suisse AG Singapore TC AR CL PT Trans Airways ( a group of companies) with 16 percent; public ownership of 14.8 percent, and other minority shareholders with the remaining 0.1 percent.
Meanwhile, MNC Sekuritas research head Edwin Sebayang said he doubted the airline would begin to pay out dividends this year due to its current financial woes.
'Garuda posted net losses in the first quarter of this year due to soaring costs, especially on fuel. At the same time, Indonesia is experiencing an economic slowdown that is stopping people from traveling. So, I think any profits the firm may be able to book will be retained to support operations,' he said.
Garuda's latest financial report revealed that it suffered net losses of $163.89 million from January to March. Its operating revenue was flat at $807 million, even though the total number of passengers surged by 15.6 percent year-on-year to 6.4 million.
Edwin added that the prepayment announcement was not attractive enough for shareholders to increase their stake in the company. 'Its financial results will determine investors' interest,' he said.
Separately, Trust Securities analyst Reza Priyambada said that Garuda's growth in traffic and passengers would play a bigger role in determining the direction of its share price.
Garuda had previously said that it was looking to fly up to 28 million people by year-end, up from 25 million in 2013.
Following the announcement, the company's shares rose slightly by 0.2 percent to Rp 417 on Tuesday from the day before.
