Garuda Indonesia’s Creditors Submit Claims of $13.8 Billion

(Bloomberg) -- Creditors of struggling airline PT Garuda Indonesia have submitted about 198 trillion rupiah ($13.8 billion) in claims as part of a debt restructuring, according to court-appointed administrators.

The administrators for the flag carrier received claims from more than 470 creditors by the end of a Jan. 5 deadline, Martin Patrick Nagel and Jandri Siadari, members of the team of administrators, wrote in replies to questions from Bloomberg. They will now verify the provisional claims and decide on Jan. 19 what amount are valid and can be included in the restructuring process. 

State-owned Garuda is among a string of airlines globally that have been hit by an unprecedented crisis in the aviation industry as pandemic travel curbs sent passenger traffic plunging. Renewed restrictions in a number of countries after the omicron variant outbreak are now further complicating the outlook. In Asia, Philippine Airlines Inc. is trying to cut $2 billion of debt after exiting bankruptcy. Elsewhere, Chile-based Latam Airlines, Aeromexico and Colombia’s Avianca Holdings sought court protection in 2020. 

Garuda has taken steps to try to buy more time. The company is seeking to extend the maturity of its dollar sukuk -- Islamic debt securities -- by 10 years. Currently they are set to mature next year. In a sign of market concerns regarding the airline’s recovery prospects, the indicated price of the sukuk recently fell to record lows under 23 cents on the dollar. 

The airline is a major employer and a vital mode of transport for Indonesia, made up of 17,000 islands over an area spanning the distance from New York to London. The state-owned airline was already struggling to stay profitable even before the pandemic brought travel to a standstill. The company entered a court-supervised debt restructuring process after a Jakarta court accepted a petition filed against it in December. 

A deputy at the country’s state-owned enterprises ministry said in November that Garuda was ‘technically bankrupt’ and planned to reduce its liabilities by more than 60% via a restructuring process in order to survive the pandemic. Under its proposal, the company planned to reduce its liabilities to $3.7 billion from $9.8 billion. 

The higher figure presented by the creditors was partially due to some lessors submitting the total and future liabilities of Garuda and not discounting or calculating the present value of those debts, and the carrier will stick with its $9.8 billion liabilities on its books, Finance Director Prasetio said when asked by Bloomberg about the creditor claims. 

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