GOVT DOWNSIZES GARUDA IPO

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By TESTCustomwebLP TESTCustomwebLP January 27, 2011 17:06

GOVT DOWNSIZES GARUDA IPO

The Indonesian government has downsized the initial public offering of the national flag carrier Garuda Indonesia amid uncertainty in the local stock market over recent weeks. At the same time the government also decided to set the price of the airline’s shares at Rp 750 (US$0.08) below its initial target of above Rp 1,000 per share.

State-Owned Enterprises Minister Mustafa Abubakar said that his office had decided to fix the price of the airline’s shares at the bottom-end of the previously set price range of between Rp 750 and Rp 1,100 per share. “We don’t want to see Garuda suffer [potential] losses from the current market situation”.  Mustafa also said that the ministry had also decided to lower the size of the IPO to 5.73 billion shares instead of the planned 9.36 billion stipulated in the prospectus. This was in contradiction to the State-Owned Ministry’s deputy for restructuring and privatization which stated that the sales to be sold in the IPO totaled  6.3 billion shares, not 5.73 billion shares as stated by Mustafa. It said that the total shares to be sold to the public accounted for 26.67% of the airline’s enlarged equity.

The benchmark stock index, Jakarta Composite Index (JCI), has been under selling pressure during the last several weeks as foreign investors reduced their holdings due to fears of high inflation. The index, which reached its high of 3,783 in the first week of this month, fell back to last September’s 3,300 on Monday. Although the index increased for two consecutive days on Wednesday it still lost 5.7 percent so far this year after gaining 465 in 2010.

Garuda expected to raise Rp 4.75 trillion from the initial shares offer —Rp 1.45 trillion of which belongs to state lender Bank Mandiri, which owned 7.2% as the result of the debt-to-equity swap with the flag carrier or equal to 1.9 billion shares. Garuda will pocket a net Rp 3.3 trillion through the offering.

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By TESTCustomwebLP TESTCustomwebLP January 27, 2011 17:06
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