Rajawali Group eyes stake in debt-ridden Garuda Indonesia

Ary Hermawan, The Jakarta Post, Jakarta

Widely diversified local company the Rajawali Group has expressed interest in buying a stake in the ailing national carrier Garuda Indonesia, one of state firms on the goverment's privatization list.

The Rajawali Group, owned by business tycoon Peter Sondakh, has sent a letter to the State Ministry for State Enterprises to express its intention to buy part of the debt-ridden airline.

"We already sent the letter to State Minister for State Enterprises Sugiharto and Garuda Indonesia CEO Emirsyah Satar today (Thursday)," the company's spokesman, Fritz E. Simanjuntak told Antara on Thursday.

The national airline has struggled to pay its foreign currency-denominated debts, worth up to US$791 million. It owes $510 million to Europe's Export Credit Agency, $130 million to a promissory notes holder in Singapore and the remainder to Bank Mandiri and airport operator PT Angkasa Pura.

The government has devised a number of options to restructure the massive debt, one of which is opening a strategic partnership for new investors.

"The Privatization Committee is still discussing which option we will take," Sugiharto said, as quoted by Antara.

He said the government would retain its position as the majority shareholder in the carrier by holding at least a 51 percent stake. A number of investors from Asia, Europe, the Middle East and North America have expressed intentions to buy Garuda shares, Sugiharto added.

Earlier reports said that the Rajawali Group, which owns a 24.9 percent stake in PT Semen Gresik Tbk, the largest cement producer in Indonesia, and a 40 percent stake in cigarette company PT Bentoel Internasional Tbk, would form a consortium with United States-based company Texas Pacific Group, Lufthansa Airlines, Air Canada and Thai Airways to fund the national airliner. Rajawali managing director Darjoto Setiawan said it was too early to talk about fund injections for Garuda.

He said his company had not yet looked at the details of the airline's financial situation and only knew a little from the media, but that he was optimistic the airline industry would continue to grow and that Garuda had a bright future.

"We a national business group with long experience of running a number of companies. The government should consider it," he added.

Rajawali currently operates PT Metropolitan Retailmart, the owner of Metro Department Store, PT Karya Agung Kiosma Lestari, Sheraton Hotel Laguna Nusa Dua, PT Express Transindo Utama, and the Guardian pharmacy chain.

"It is feasible, we'll certainly take the chance to join Garuda," Darjoto said.

The government has committed to giving Rp 1 trillion to Garuda to help the airline function more healthily. Half of the money was released last year and the rest will be handed over this year. Garuda has been required to come up with a concrete plan to settle its mounting debts.

The government had earlier planned to establish a special purpose entity, the Asset Management Company, to take over $644 million of Garuda's $794 million in debts, along with six of its aircraft. Garuda will then have to repay the money in 10 years.
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