Garuda Indonesia wants to amend conditions of its 2015 $500 million global sukuk issue after its financial performance failed to meet the issue's original terms.

The Indonesian flag carrier wants to amend conditions to say that its consolidated total equity shall not fall below $500 million, and that its consolidated debt to equity ratio shall not exceed three times. The carrier revealed its plea to sukuk holders in a Singapore Stock Exchange statement.

The carrier also wants to change the definition of "consolidated total debt" to exclude references to "indebtedness under a finance or capital lease", and to waive any dissolution or breach of terms and conditions.

In it, it also disclosed that Garuda recorded a net loss of $283.8 million in the first half of the year, attributable to a $138.3 million loss due to tax amnesty programme expense, and $145.5 million to losses from operations. Net losses from operations amounted to $145.5 million for the six months.

As of 30 June, Garuda had a consolidated total equity of $717.7 million. As of 27 July, however, it is no longer in compliance with the condition that consolidated total equity should not fall under $800 million, says the announcement. This is a potential dissolution under the terms of the declaration of trust, it adds.

The carrier is hence seeking to amend the conditions to maintain financial compliance across its capital structure, and to "seek operating and financial flexibility to better meet economic challenges during the remaining tenor of the certificates".

Garuda faces similar conditions in a number of other short-term and long-term loans. It has initiated discussions with lenders to seek similar waivers and modifications, and hence also requires a waiver of any cross-defaults.

Sukuk holders who vote in favour will receive a participation fee of 0.6% of the outstanding principal amount of their certificates. A shareholder meeting is scheduled for 18 August in Hong Kong.

The consent solicitation commences on 27 July and will expire on 16 August.

The $500 million Islamic bond was issued in May 2015, with a five-year tenure and a coupon rate of 5.95%. It was four-times oversubscribed despite the lack of credit ratings and collateral or a government guarantee.

Garuda had said that proceeds from the issue would be used to finance corporate needs, including payment of debt. In June, sources told FlightGlobal that Garuda has approached Boeing, Airbus, and ATR, seeking to defer the majority of its aircraft deliveries amid financial worries.

Source: Cirium Dashboard