Airline Garuda Indonesia defaults on $500 million sukuk

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“Under these circumstances, and in order to ensure the company emerges from the pandemic as a strong and healthy airline, the company announced today that it has reluctantly concluded that it must continue to defer the payment,” the airline said in a statement.

Garuda has appointed Guggenheim Securities LLC as a financial adviser to evaluate its strategy and improve its finances, the company said.

Other strategic partners included brokerage Mandiri Sekuritas and law firms Cleary Gottlieb Steen & Hamilton LLP and Assegaf Hamzah & Partners, it said.

Garuda chief executive Irfan Setiaputra said in the statement the decision to defer payments was “a difficult and unavoidable step” while the company focuses on improving its performance.

Garuda had already restructured the sukuk by extending the maturity by three years. The sukuk was originally due to mature last year.

Earlier this month Garuda returned two Boeing (NYSE:BA) B737-800 jets to one of its lessors before their lease term ends to reduce cost.

Garuda is also seeking a suspension of debt payments to other creditors and lessors under a ‘standstill agreement’, a senior government official said. The government holds a more than 60% stake in Garuda.

Garuda’s shares closed near its lowest in 8 months on Thursday. Trading was suspended on Friday.