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Indonesian airline Garuda free to offer dividends after repaying debts

JAKARTA -- Garuda Indonesia, the Southeast Asian country's national airline, on Tuesday declared it has settled debts to European lenders and is now free to pay dividends to shareholders.

     In a stock exchange filing, the carrier said it made an early repayment on $62.5 million worth of loans Monday. The loans were obtained in 1996 from the European Export Credit Agency and commercial lenders; they were restructured in 2010, as the airline continued to struggle to recover from the Asian financial crisis. 

     The restructuring agreement included a clause restricting dividend payouts. Garuda has not paid a dividend since its initial public offering in 2011.

     "The company is no longer bound by the covenants of the ECA and the (commercial lenders), one of which is a limitation in performing dividend distribution," Handrito Hardjono, the airline's finance director, said in a statement.

     The announcement had little impact on Garuda's stock, which was trading at around 417 rupiah on the Jakarta bourse Wednesday afternoon.

     While the company has cleared away the legal constraints preventing it from rewarding investors, there are concerns its finances will remain an impediment. Garuda reported a net loss of $163 million for the January-March term, widening from a $33 million loss logged the same period last year.

     The airline has been hit by a weak home currency and tougher competition from budget carriers. Garuda's shares have fallen 15% since the end of last year.

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