Groundhog Day for Garuda's creditors - Reuters

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A technician walks as he checks Garuda Indonesia's Airbus A330-200 airplane at the GMF AeroAsia, at Soekarno-Hatta International airport near Jakarta, Indonesia, March 13, 2019. REUTERS/Willy Kurniawan - RC1C9E7F4490

One year ago, creditors of Garuda Indonesia (GIAA.JK) gave the national carrier approval for a three-year extension on a $500 million sukuk, or Islamic bond. Now the airline has deferred those payments and is asking for a wider standstill . A government official says its debt is around $4.5 billion and needs to be restructured to one-third or less of that amount for the company to survive.

Garuda was in poor shape pre-pandemic, and its long effort to avoid bankruptcy has come to a head. Even the government, the company’s majority owner, has cut back on support after it breached covenants. Aircraft lessors have the most to lose, and foreign debt-holders will complicate any resolution.

There’s bumpy air ahead if other Southeast Asian carriers’ experiences are a guide. A court hearing on Thai Airways International’s (THAI.BK) $7.8 billion restructuring has been delayed read more because of creditor complaints. While shareholders in the long-haul unit of Malaysia’s AirAsia (AIRA.KL) have approved a debt rejig, creditors are yet to consent. With the pandemic still burning, options are limited. (By Una Galani)

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