Financially troubled Garuda Indonesia has secured a court order granting the carrier a short-term reprieve from making debt payments. The 9 December ruling by a commercial court comes after an IT solutions provider, Mitra Buana Koorporindo (MBK), filed a debt petition against Garuda in October 2021. Based on a ruling detailed on the commercial court’s website, MBK’s petition against Garuda was accepted by the court, who in turn, has set a 45-day period for the carrier to negotiate with its debtors.
As part of the ruling, four individuals were appointed by the court to manage the process, and that another hearing has been scheduled to take place after the 45-day period ends.
Following the ruling, Garuda issued a press release welcoming the court’s order, which was reported by the local media, saying that the decision “is an important foundation” for the carrier, which is undergoing restructuring.
“The [court’s] decision gives us 45 days to submit a proposal that includes a plan to restructure its obligations to creditors. We will coordinate with the management team, under the supervision of the supervisor judge and ensure that all related matters run in accordance with the law,” says Garuda’s president and chief executive Irfan Setiaputra.
He also stressed the process is not related to bankruptcy, and that the process gives it a legal cover to negotiate with debtors, while also allowing it to become a stronger company in the future.
Garuda says during the court-supervised process, it will continue to operate passenger and cargo flights as usual. The carrier also expressed its gratitude to the Indonesian government, its employees, and business partners for extending their support to the carrier to continue its operations despite the financial troubles it faced.
Meanwhile, a 9 December report by Bloomberg indicates that Garuda has $9.8 billion in debt, and that the court-led process could potentially reduce its liabilities to $3.7 billion, while also permitting the carrier to renegotiate its leasing terms or return its leased aircraft with the “smallest penalties possible.”
Earlier in November 2021, Garuda issued a press release to the Indonesia Stock Exchange stating that it had submitted a restructuring proposal to lessors and creditors, urging them to review the proposal “as a basis for considering the restructuring process that will be carried out.”
For the first nine months of 2021, Garuda Indonesia posted a larger operating and net loss, as a decline in revenue being the key contributor to the widening loss.