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Garuda’s Cash Crunch

Government Unable to Help Garuda’s Need for More Working Capital


Bali News: Garuda’s Cash Crunch
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(8/10/2014)

The Indonesian government has rejected requests for additional working capital submitted by the State-owned flag carrier Garuda Indonesia.

According to Bisnis.com, the government cites a lack of designated allocations in the State Budget for capital support to the airline as preventing the cash injection sought by the Airline.

The deputy-manager in chare of finance, construction and other service at Garuda, Gatot Trihargo confirmed that the government faces difficulties in financially shoring up the Airline.

As a publicly-traded company owned by the government, whenever a new or additional rights issue is launched the government’s shareholding becomes necessarily diluted.

“Additional capital is not allocated for in the current government budget,” explained Trihargo.

A possible injection of cash or new rights issues has reportedly not been tabled for discussion between Garuda and the Minister for State Owned Enterprises.

Garuda has been seekin new capital sourced from the government in order to meet the Airline’s growing need for cash.

The director of finance for Garuda Indonesia, Hadrito Hardjono, told the press that the Airline’s finances are under pressure with the ratio of debt to equity now a critical juncture.

Hardjono said the debt to equity ratio of the airline is now 1.1 – a situation considered too restricting to maintain normal financial operations. The Finance director declared that any ration exceeding 1.1 would have a deleterious on the Airline’s balance sheet.

At the end of June 2014, Garuda Indonesia’s total dept had reached US$1.2 billion with the company’s assets valued at US$1 billion.

Garuda Indonesia had debts of US$200 to US$300 million that must be settled in the current year.


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