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Garuda, Krakatau Steel receive state injections through MCB issuances
The MCB scheme channeled to both companies is part of the government’s Rp 695.2 trillion national economic recovery (PEN) program.
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An airplane of Indonesia's national carrier Garuda lands on a runway beside a paddy field at Blang Bintang airport in Banda Aceh on April 2, 2019. (AFP/Chaideer Mahyuddin)
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ational flag carrier Garuda Indonesia and state-owned steelmaker PT Krakatau Steel issued on Monday mandatory convertible bonds (MCB) worth trillions of rupiah as a means to receive a state capital injection to weather the economic downturn caused by the coronavirus outbreak.
The MCB agreements were signed separately by the companies with state-owned infrastructure financing company PT Sarana Multi Infrastruktur (SMI), which is appointed to carry out such investments allocated in the government's national economic recovery program.
Garuda issued Rp 1 trillion (US$70.6 million) in MCBs with a three-year tenure from a total of Rp 8.5 trillion worth of planned MCBs in a span of seven years to improve the company’s liquidity, solvability and to cover operational costs. The remaining Rp 7.5 trillion will be issued gradually, said Garuda Indonesia president director Irfan Setiaputra.
“The issuance of the MCBs will build an optimistic outlook for our company next year. We believe that the MCBs can consistently accelerate Garuda Indonesia’s performance,” he said during a virtual press briefing on Monday.
Read also: Pandemic taking heavy tolls on SOEs
In July, the House of Representatives gave permission for the government to provide a capital injection for the airline in the form of MCBs to soften the pandemic’s impact on the company. The MCB will require a conversion of the bonds into stocks in accordance with the contractual conversion date.
The MCB scheme for both companies is part of the government’s Rp 695.2 trillion national economic recovery (PEN) program.
