Fitch Compares Garuda Indonesia's USD 500 Million Debt Failure Case With A Tanker Company

JAKARTA - The international debt rating agency Fitch Ratings said PT Garuda Indonesia Tbk's default case for issuing global sukuk worth 500 million US dollars was similar to that experienced by PT Berlian Laju Tanker Tbk (BLTA) several years ago.

Director of Fitch Ratings Indonesia Olly Prayudi said the two business entities both issued debt securities denominated in foreign currencies (dollars) with sharia principles.

However, Olly said that if the settlement of disputes over non-payment of sukuk issued by Indonesian companies is very likely to be resolved by conventional methods and not sharia.

"A court-supervised debt moratorium and bankruptcy proceedings for sukuk are rare given the complexity of making such an application in a domestic religious court, in contrast to a commercial court," he said in an official statement as quoted on Friday, July 9.

Olly added that Indonesian law states that religious courts have the authority to settle Islamic finance disputes. In practice, however, this can be resolved in a commercial court if both parties agree.

Furthermore, religious courts are often used to settle simpler retail transactions, while commercial courts usually hear complex commercial disputes, as litigants consider officials to be more competent in deciding the matter.

"For example, PT Berlian Laju Tanker Tbk's failure to pay sukuk in 2012 was resolved through a commercial court and resulted in a restructuring plan," he said.

The failure of Islamic financing among financial institutions, continued Olly, has been treated the same as conventional loan defaults from what we have observed so far.

"Restructuring domestic public sukuk out of court generally follows the same treatment as bonds and includes extension of maturity and suspension of periodic distributions," he stressed.

As previously reported, the management of Garuda Indonesia decided to postpone the payment of global sukuk coupons worth 500 million US dollars or equivalent to Rp. 7.1 trillion (exchange rate of Rp. 14,398).

"The company today announces with a heavy heart that it will continue to delay the payment of the periodic distribution amount due on June 3 based on the USD 500,000,000 Garuda Indonesia Global Sukuk Limited Trust Certificate Maturity 2023," the state company coded GIAA said in a statement. disclosure of information to the Indonesia Stock Exchange (IDX).