Garuda Airline’s Sukuk default resolution could set precedent in Indonesia

The June 2021 default by Indonesian airline, PT Garuda Indonesia, on its US$500 million sukuk could provide clarity on sukuk restructuring, resolution and enforceability in the country, Fitch Ratings says. Legal precedent for effective enforcement in many jurisdictions where sukuk issuance is prevalent is lacking, including in Indonesia. It therefore remains uncertain whether certificate holders will be able to enforce their contractual rights in relevant courts. Fitch does not rate Garuda or its sukuk, but it is monitoring developments closely. Sharia requirements could make sukuk default resolution more complex than bond default resolution. Complexity is also added by Garuda’s capital