Fri, 23 May 2003

Astra aims to resume bank borrowing by year-end

Rendi A. Witular, The Jakarta Post, Jakarta

Indonesia's largest car manufacturer PT Astra International said it was optimistic that it could greatly reduce its debt level by the end of this year, which would allow the company to borrow from the bank again sooner than it expected.

Astra president Budi Setiadharma said on Thursday the company would be able to reduce its debt load by 50 percent this year, in what is also called the release date status, by using funds drawn from the issuance of new shares and the divestment of subsidiaries.

"We expect to reach the release date sooner than our earlier schedule of 2004 so that we can obtain bank loans again," Budi said following the company's annual shareholders meeting.

The release date status will be achieved if Astra cuts its debt level to US$500 million from $1 billion in 1999, when the first debt restructuring deal was signed.

As of the first quarter of this year, Astra's debt level had declined to $775 million, which means the company has to pay the remaining $275 million to secure the release date status.

Astra finance director John S.A. Slack announced that the company had paid back about $25 million of its debts in the first quarter of this year.

Astra raised Rp 1.4 trillion ($164 million) in proceeds from the issuance of new shares in January. It will receive another $226 million from the divestment of a 46 percent stake in joint- venture auto manufacturer plant PT Toyota Astra Motor (TAM) to its partner, Toyota Motors Corporation, which was approved at the shareholders meeting.

After the sale, Astra's stake in TAM will be reduced to 5 percent, while Toyota's stake will increase to 95 percent.

Astra plans to use 75 percent of the proceeds to repay its debts, and the remaining 25 percent for either the debt buyback or investments.

Astra has been selling assets, including stakes in a number of joint ventures, since the 1997-1998 Asian financial crisis to pay off its debts.

The meeting also approved plans to set up a distribution company in which Astra will own a 51 percent stake and Toyota Motors a 49 percent stake, however, no details were provided.

Astra's shareholders also approved a proposal not to distribute a 2002 cash dividend due to the company's huge debts.

Astra's net profit for the first quarter of this year slid 24 percent to Rp 842.31 billion ($96.8 million) from Rp 1.114 trillion during the same period last year.

Astra sold 34,563 cars in the first three months of this year, which is 42 percent of total car sales in the nation.

The company plans to allocate some $42 million of capital expenditures this year to strengthen the distribution business, and increase the output capacity of its cars and motorcycles, which is expected to grow at about 10 percent this year.