Debt Restructuring Forces Garuda to Postpone IPO

By webadmin on 10:42 pm Sep 22, 2010
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Faisal Maliki Baskoro

National flagship carrier Garuda Indonesia has delayed its plan to go public to next year because the company is still consolidating its financial report, a senior official at the State Enterprises Ministry said on Wednesday.

The government-owned carrier had planned an IPO in November, but as the government weighs details of the offering and the company’s finances, Mahmudin Yasin, the ministry’s deputy for privatization and restructuring, said the process would push the debut back to February.

“An accurate and detailed financial report is needed before Garuda can go ahead with its IPO because Garuda never issued any bonds before,” he said.

The report, Yasin added, “might take some time because Garuda has a lot of branches and subsidiaries.”

But Garuda would still file its plan for an IPO with the stock market watchdog Bapepam by the end of this year, Yasin said.

Garuda, which saw its profit fall by 80 percent in the first half of 2010, had initially hoped to generate around $400 million by floating 30 percent of its shares.

Elisa Lumbantoruan, Garuda’s acting finance director, confirmed that the IPO was going to be carried out in early February.

“As advised by our underwriters, international selling agents and our auditor, Garuda will assess its financial report and conduct a thorough audit. The whole process is expected to be completed by October,” he said.

Because of the complexity and scope of the company, Elisa said Garuda wanted to avoid haste in compiling its financial report.

“We will take our time because investors may be suspicious if we rush into things,” he said.

The company first decided to push its launch back to Jan. 5, but decided on early February instead because of the holiday season.

Elisa added that Garuda had not yet revised its IPO funding and share percentage target.

The company is also still in talks about a $325 million debt restructuring scheme with the European Credit Agency.

Elisa said that the debt restructuring was expected to be completed by the end of this month or early October.

Juniman, an economist at Bank International Indonesia, said that the financial report was a normal reason for Garuda to delay its IPO.

“The financial report is related to Garuda’s debt restructuring. The company needs to reorganize its debt to pave the way for its IPO; this may take some time because the restructuring of debt needs negotiations,” he said.

“Unfortunately for Garuda, this year is the moment [to go public]. The stock market has been bullish, and investors’ appetites are big because of high returns.”

In July, Garuda said that it was still finalizing the debt restructuring, which had already consumed three years. .