PT Garuda Indonesia on Friday filed for chapter 15 bankruptcy protection in the Southern District of New York court, as the debt-laden carrier tries to secure its future profitability, Bloomberg News reported. The submission comes as the airline, having completed a court-supervised debt restructuring in Indonesia to halve reduce its debt load, tries to capitalize on the rebound in international travel. Garuda’s total debt now amounts to roughly $5.1 billion, President Director Irfan Setiaputra told parliament in Jakarta on Monday. Reviving the national airline is a top priority for the Indonesian government, because the country relies on air transport for connectivity and to support its tourism industry. The airline could post net income of around $400 million next year and gradually increases its earnings to $647 million in 2026, according to a projection by Indonesia’s finance ministry this month.
SAS AB Chief Executive Officer Anko van der Werff said he’s confident the Scandinavian airline will emerge successfully from a chapter 11 restructuring after winning clearance for a $700 million financing package and seeing a rebound in its own performance, Bloomberg News reported. Approval for the Apollo Global Management funding from a US bankruptcy judge is “the biggest and most important news” for SAS and will be “vital” as it seeks to move forward with a new strategic plan, Der Werff said Thursday in an interview in Gothenburg, Sweden. Operations have stabilized since the end of a pilot strike in August, the CEO said, and while the dispute cost “considerable money” and “disappointed a lot of people,” the first two weeks of September have produced a “far better” operational performance at the airline, with passengers rushing back. “Operationally we are stable,” he said, adding that the company’s forecasts still stand, with no sign so far that a cost-of-living squeeze will curb demand. “We are not going to put additional capacity in. But right now we are really content with how the winter is developing.” Stockholm-based SAS expects the chapter 11 process to continue until May or June, during which time the tri-national carrier will have sufficient liquidity, aided by the flow of cash from its own operations, according to the CEO.
Serbia has started discussions with the International Monetary Fund to receive financial assistance as the southeastern European country faces soaring borrowing costs on international bond markets, WSJ Pro Bankruptcy reported. Officials in Belgrade are currently in talks to receive a so-called stand-by arrangement, a financial lifeline to help manage balance of payments imbalances for a short period, usually less than two years. Serbia has around $19 billion in external debt and its foreign debt-to-GDP ratio is expected to reach 33% by the end of 2022, compared with 17% on average for similarly rated governments, according to Fitch Ratings. “The authorities in Serbia have expressed interest in a program with the IMF and we’re following that up and holding discussions with the government to discuss financing needs and the appropriate policy response,” IMF spokesman Gerry Rice said on Thursday. The IMF didn’t provide any further detail on the size or scope of the potential program, which comes as Serbia’s cost of borrowing from bond markets has increased from under 2% as of last year to just shy of 7%, according to Refinitiv. Risk premiums are rising for emerging economies worldwide, reflecting the impact of rising interest rates in the U.S. and Europe and growing concern about high debt levels in frontier markets.
Investors placed orders for over $1 billion of Russian bonds as part of a long-anticipated credit-default swap auction on Monday, more than three months after the Kremlin was ruled in default for failing to pay back creditors, WSJ Pro Bankruptcy reported. The high demand for Russia’s sovereign bonds reflects growing investor appetite for its bonds despite punishing sanctions on the Kremlin. While U.S. investors were forbidden from purchasing Russian debt this summer, the U.S. Treasury Department has allowed for the bonds to freely trade over the next week to best allow for investors to settle their swap contracts. Investors who either bought or sold protection against a Russian debt default indicated a net interest to buy around $500 million in Russian bonds in Monday’s auction, reflecting a bid of $1.3 billion to buy bonds and around $800 million of swap investors putting in requests to sell, auction data show. The greater demand from buyers in the auction suggests that some protection sellers wanted to cap their exposure by inflating the price of Russian bonds, thereby reducing what they owe to protection buyers, said Fabien Carruzzo, head of the derivatives group at law firm Kramer Levin Naftalis & Frankel LLP. “Presumably some also saw an opportunity to buy those assets, or buy more of them, at a favorable price given the limited trading window.” Goldman Sachs Group Inc. in total bid for more than $1.3 billion worth of Russian sovereign bonds on behalf of swap investors, making it the only participating investment bank to put in a net positive order to buy Kremlin-backed debts, auction data show. There is around $1.5 billion of swaps referencing Russia outstanding, suggesting that Goldman Sachs transacted on behalf of nearly all outstanding protection sellers. With the $500 million imbalance between swap investors looking to buy bonds and investors trying to sell, outside investors holding Russian bonds filled the gap during the second phase of the auction, unloading roughly $500 million of bonds at a price of 56 cents on the dollar.
Bankruptcy Judge Michael Wiles on Friday approved a $700 million financing package for SAS AB from Apollo Global Management, though he said features of the deal concern him, Bloomberg News reported. The financing, divided into two $350 million draws, will allow Apollo to convert the debt into stock in the bankrupt airline or participate in an equity raise tied to SAS’s eventual exit from chapter 11 protection under certain circumstances. Judge Wiles called the financing “unusual” and questioned whether it was legally viable. “I will approve the arrangement, although not without some significant reservations,” Judge Wiles said in a hearing held by telephone Friday. “To be honest, I still have some misgivings about the whole idea.” Judge Wiles said the structure is akin to SAS selling options on stock that does not yet exist, a concept he found legally murky. While questioning SAS advisers in court, he asked whether the deal might dissuade potential suitors for the airline from making proposals that would ultimately be better for the company’s creditors. Lawyers and bankers for SAS emphasized that the airline has the ability to terminate Apollo’s options by paying fees to the asset manager. They also argued that the deal is a substantially cheaper way to finance its operations than a standard loan arrangement and is allowed under bankruptcy rules.
The British movie theater chain Cineworld, weighed down by a mammoth debt pile, filed for chapter 11 bankruptcy in the U.S. yesterday, having failed to rebound from the pressure inflicted by the pandemic, the New York Times reported. Cineworld, the world’s second-largest theater chain after AMC Theaters, will seek to significantly reduce its debt through reorganization, the company said in the filing. The company, which is based in London and operates Regal Cinemas in the United States, reported $8.9 billion in debt at the end of 2021, including $4 billion in lease liabilities. Some of the debt was taken on in the pandemic as the company sought to outlast lockdowns that had sapped its revenue. Cineworld said yesterday in its filling that it had secured $1.94 billion in debtor-in-possession financing that would allow it to keep up its operations while it restructures its obligations. “The pandemic was an incredibly difficult time for our business, with the enforced closure of cinemas and huge disruption to film schedules that has led us to this point,” Mooky Greidinger, the company’s chief executive, said in the filing. Shares of Cineworld, which are traded on the London Stock Exchange, have lost close to 86 percent of their value since the beginning of the year and the company reported a loss of $565.8 million in its most recent earnings report. Before the pandemic, Cineworld had entered an agreement to acquire the Canadian company Cineplex, but it backed out of the deal in June 2020 after the pandemic hit. Cineplex sued for breach of contract, winning a fine of close to $1 billion from a Canadian judge, which Cineworld has yet to pay.
Zambia has requested $8.4 billion in debt relief from its foreign creditors over the next three years, including from China, the country’s single largest creditor and the largest lender to the developing world, WSJ Pro Bankruptcy reported. Zambia’s debt restructuring is widely seen as a test of how much debt relief China will be willing to provide to countries that can’t repay what they have borrowed from Beijing, which has shown a reluctance in recent years to write down its bilateral debts, preferring to lend more or reprofile them rather than accept haircuts. The International Monetary Fund released a debt sustainability analysis for Zambia on Tuesday showing the country has requested $8.4 billion in debt relief through 2025 to help plug an $11 billion financing gap over the next three years. Zambia carries roughly $17 billion in foreign debt plus interest arrears, mostly split between sovereign creditors like China, multilateral lenders and commercial bondholders. Debt relief between now and 2025 would help stabilize Zambia’s foreign reserves and keep debt servicing at sustainable levels, the IMF said. Sovereign creditors agreed in principle to provide debt relief in July, unlocking the first part of an IMF bailout of around $1.3 billion, approved in late August. The World Bank is also providing around $1.2 billion to help plug the financing gap.
A unit of Malaysia’s state-owned investment fund 1MDB — which has spurred investigations around the world into deal-making and political patronage under former Prime Minister Najib Razak — is seeking bankruptcy protection in the U.S., Bloomberg News reported. Brazen Sky Ltd., which is fully owned by 1Malaysia Development Bhd., filed for chapter 15 in Southern District of Florida court, according to a filing. The document listed voluntary liquidation pending in the British Virgin Islands, where Brazen Sky is incorporated. The development comes just days after Najib was imprisoned for 12 years, following Malaysia’s top court upholding a 2020 conviction for corruption in relation to 1MDB, from which billions were siphoned. According to a US indictment, a small coterie of Malaysians, led by businessman Low Taek Jho (known as Jho Low), diverted money from 1MDB into personal accounts disguised to look like legitimate businesses, and kicked back some of those funds to officials. Officials at 1MDB and others were alleged to have engaged in fraudulent conduct to conceal an overvaluation of Brazen Sky assets, which itself was used to conceal the diversion of more than $1 billion from a 1MDB investment, a US court filing in 2020 showed.
