Garuda Indonesia shareholders approved a rights issue of up to 248.7 billion new shares at an extraordinary meeting on Friday, Nov. 6, clearing the way for state investment fund Danantara to pay for its stake with the airline's own former maintenance unit rather than cash.

The deal is the latest step in the restructuring of Indonesia's flag carrier, and it doubles the size of the share sale Garuda first floated in early October. For investors in Jakarta and across Asia, it is another test of how Danantara intends to manage the state companies it now controls, and of how much room is left for minority holders in heavily state-owned listed firms.

Garuda rights issue twice the original size

The offering, Garuda's third pre-emptive rights issue, covers up to 248.7 billion Series E shares with a nominal value of Rp25 each, according to a report on the meeting carried by BCA Sekuritas from the IQPlus and Antara news services. Shareholders holding 92.115% of valid voting shares attended.

When Garuda first disclosed the plan on Oct. 5, it proposed up to 124.4 billion new shares and had not set a price, aviation data provider ch-aviation reported at the time. By Nov. 9, ch-aviation reported an indicative range of Rp58 to Rp68 a share.

At that range, the full issue would be worth roughly Rp14.4 trillion to Rp16.9 trillion, by Capital Times' calculation. Garuda has not said how much it expects to raise in cash. In October, ch-aviation reported that public shareholders would be able to take up their rights in cash and that the remaining proceeds would go to working capital.

The meeting also approved changes to the articles of association. Garuda did not publish a timetable for the record date or the subscription period.

Danantara pays with GMF AeroAsia shares

Danantara Asset Management, Garuda's controlling shareholder, will subscribe through an in-kind contribution, known in Indonesia as inbreng, of 82.1 billion Series B shares in PT Garuda Maintenance Facility Aero Asia (GMFI). That block is 65.77% of the listed maintenance company's issued capital, EmitenNews reported, citing a Garuda disclosure.

The stake carries a value of Rp5.66 trillion, according to EmitenNews and BCA Sekuritas. Ch-aviation put the figure at about $314.6 million.

The shares took a short route to Danantara. Angkasa Pura Indonesia, the state airport operator, released its entire GMFI holding on Nov. 2 through a dividend in specie, and the shares moved via the InJourney aviation and tourism group to Danantara Asset Management, EmitenNews reported. Angkasa Pura said the transfer was not a repurchase arrangement.

Once the inbreng is complete, Garuda will again hold a majority of GMF AeroAsia, the meeting report said, subject to the transaction steps and regulations.

The maintenance company has its own recovery under way. Its nine-month net profit was $22.14 million, held back by foreign-exchange losses, while revenue rose 34.6% from a year earlier to $413.42 million, BCA Sekuritas said in its Nov. 9 morning note. GMF's equity turned positive at $155.76 million after a quasi-reorganization approved on July 28, the broker said.

For Garuda, folding GMF back in brings a growing service business onto its balance sheet without new cash from the state. For outside shareholders, the trade-off is that Danantara's contribution is priced off a valuation of a related company rather than a cash bid.

New finance chief at Garuda Indonesia

Shareholders also reshuffled the boards. Sophia Wattimena, a former member of the board of commissioners at the Financial Services Authority (OJK), became director of finance and risk management, replacing Balagopal Kunduvara. Hadiyan Sumintaatmadja was named deputy president director.

António José Vasconcelos Franco Gomes de Menezes joined as an independent commissioner, while Trey Urbahn was removed from that role. Thomas Oentoro is president director, and Glenny Kairupan is president commissioner.

The rights issue and the management changes are part of the group's 2025 to 2029 restructuring and recovery program, the meeting report said.

Danantara has been pressing for better returns from state companies, and Garuda remains one of its most demanding cases. The airline's planned merger with state-owned Pelita Air has been delayed beyond 2026, ch-aviation has reported, and in October the carrier sought more debt and extended its fuel payment terms.

The next marker is the prospectus with a final exercise price and timetable, which will show how much cash Garuda can raise from minority holders on top of the GMF shares.