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Garuda wins approval for debt extension, easing cash crunch

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Indonesian flag carrier Garuda Indonesia won approval from investors to extend the maturity of a US$500 million sukuk, easing a cash squeeze as the airline battles falling passenger demand during the coronavirus pandemic.

[JAKARTA] Indonesian flag carrier Garuda Indonesia won approval from investors to extend the maturity of a US$500 million sukuk, easing a cash squeeze as the airline battles falling passenger demand during the coronavirus pandemic.

The state-owned airline, whose passenger traffic fell 91 per cent in April from a year earlier, said in a statement Wednesday that investors holding 90.88 per cent of the aggregate principal amount outstanding on its US$500 million sukuk voted in favour of a three-year extension.

Garuda is also seeking to raise a bridge loan of as much as US$500 million to meet working-capital requirements for three to six months. The government, which owns 61 per cent of the carrier, has unveiled a plan to provide 8.5 trillion rupiah (S$844.8 million) for the company, which has grounded 70 per cent of its fleet.

"We are optimistic that this could be a significant initial step in the efforts to restore the performance of Garuda Indonesia which has been affected by the Covid-19 pandemic," president director Irfan Setiaputra said in emailed statement.

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Shares of Garuda climbed 3.7 per cent on Thursday, after rising as much as 5.1 per cent, putting an end to a two-day drop.

While the maturity extension could provide the carrier with some cash flow relief, the company still needs a significant amount of funding to tackle the challenges presented by the pandemic, according to John Teja, a director at Ciptadana Sekuritas Asia.

"The carrier will definitely need more financial support to ride through this pandemic," Mr Teja said. "The outlook of the overall airline industry will likely remain challenging for this year, and it is unlikely we can see a significant pick up in passenger traffic."

The virus has infected more than 35,000 people in the world's fourth-most populous nation and killed 2,000. The outbreak resulted in a 87 per cent year-on-year drop in foreign tourist arrivals to the country in April.

The government is allowing airlines to carry more passengers starting this week, as South-east Asia's largest economy lets more cities reopen after months of mobility restrictions.

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