Garuda Indonesia With A Potential Raup Fund Of IDR 14.3 Trillion From Rights Issue

Garuda Indonesia aircraft. (Photo: Wikimedia Commons)

JAKARTA - PT Garuda Indonesia Tbk (GIAA) has the potential to raise funds of up to IDR 14.3 trillion from additional capital with pre-emptive rights (HMETD) or rights issue of 68.07 billion new shares. The action carried out by this national airline was related to the injection of funds in the form of state capital participation (PMN) of IDR 7.5 trillion. Garuda management in an official statement, quoted on Thursday, October 13, said that GIAA is ready to release 68.07 billion shares or the equivalent of 268.97 percent of the company's total issued and paid-up capital. The new shares in this Preemptive Rights will be issued at an exercise price of IDR 182-210 per share. The final implementation price will be set after the government issues government regulations regarding the addition of PMN to the company in connection with OWK transactions and conversions. The date for issuing government regulations is estimated between November 11, 2022, and November 17, 2022, or no later than the effective date of the registration statement from the OJK. In accordance with the peace plan, the exercise price will also be determined by considering a fair price assessment of the company's shares by an independent appraiser. Based on Garuda's 100 percent assessment report on October 7, 2022, the independent appraiser determines the fair price of the company's shares is IDR 196 per share. In addition to the independent assessment basis, the exercise price also refers to the decision of the Minister of State-Owned Enterprises (BUMN) Erick Thohir through letter Number S-654/MBU/10/2022 dated October 12, 2022, which has set the exercise price, both rights issue and Convertible Bonds (OWK), to be in the range of IDR 182-210 per share. Meanwhile, regarding the private placement, Garuda will issue 22 billion shares aimed at converting creditors' debts worth IDR 4.2 trillion. Management believes that the private placement will be able to improve the company's capital structure. Even though the implementation price has been stated, the final price fixing will still be waiting for the Government Regulation (PP) which is planned to be issued by the Government on November 11-17. Given the nominal value of this additional capital action in the range of IDR 182-210 per share, aka lower than the nominal value of the issued shares of IDR 459 per share, the company will issue series C shares with a different nominal value according to POJK No. 31/2017 concerning share expenditure with a different nominal value. Regarding the use of the rights issue proceeds, management explained that all collected funds will be used for maintenance, restoration, and fulfillment of maintenance reserves and working capital that includes fuel, aircraft rental costs and restructuring costs. Meanwhile, the proceeds from the private placement will be used to settle the company's financial loans or obligations to creditors who are entitled to receive equity in accordance with the agreement in the peace agreement. In addition to the rights issue and private placement, Garuda also plans to issue OWK through a private placement of IDR 8.5 billion with a maximum tenor of seven years, all of which will be redeemed by the Government. Based on the OWK issuance agreement, Garuda has issued an OWK of IDR 1 trillion with a tenor for three years. According to the peace plan, OWK will be converted into the company's shares based on exercise prices. OWK, which will be converted by IDR 1 trillion, will become a maximum of 20 billion new shares in the company, all of which will be issued to the Government of the Republic of Indonesia. As for the implementation schedule, Garuda management estimates that the additional capital action will take place in December 2022 with an indication of a schedule for issuing Government regulations on PMN and privatization to be carried out on November 11-17, 2022. Then, the effective OJK participation for the rights issue on November 21, 2022, recording date on December 1, 2022, trading period and implementation of the rights issue on December 5-9, 2022, and the issuance of new shares related to the rights issue will take place on December 7-13, 2022.