Garuda Indonesia (GA, Jakarta Soekarno-Hatta) estimates proceeds of IDR12.4 trillion rupiah (USD831 million) from conducting its planned rights offering, but this is a projection that can only be realised if all shareholders exercise their rights in the forthcoming issue, CEO Irfan Setiaputra said in a written response to questions from the Indonesia Stock Exchange on September 7.
However, the management has yet to receive official confirmation from minority shareholder Trans Airways on its decision on whether to take part. The chief executive warned that shareholders refusing to participate will have their stakes diluted by up to 90.54%.
As part of its restructuring, the indebted flag carrier has said it will accommodate new shareholders, while majority shareholder the government will cut its shareholding to 51%, inject IDR7.5 trillion (USD500 million) into Garuda’s capital, and conduct the rights offering in the fourth quarter to raise more money. Currently, Garuda Indonesia is owned by the government (60.54%), billionaire businessman Chairul Tanjung’s vehicle Trans Airways (28.27%), and the public (11.19%). Both Trans and public can participate in the rights issue, Setiaputra said.
Asked what the benefits of the rights issue are for investors and for the company, the chief executive responded: “For investors, because these rights issues are specifically only for existing investors, who can obtain additional new shares at a cheaper price. For Garuda, it will be more profitable to reduce debt and inject funds to improve the company’s balance sheet rather than having to borrow funds from a bank.”
Garuda Indonesia said recently that it plans to increase the number of aircraft in its fleet that are active to 120 by the end of 2022, and it will need the additional government and other shareholders’ funds if it is to achieve this.
