Astra gets debt reprieve from creditors

Astra gets debt reprieve from creditors

Dow Jones, Singapore

Indonesia's largest car and motor cycle maker PT Astra
International won agreement from its creditors Thursday to
restructure outstanding debt worth US$850 million.

At a meeting in Singapore, Astra's creditors gave the green
light for the company to repay only half of its debt by the 2006
due date. At that time, the company will have the option of
refinancing the remaining debt, or rescheduling it to 2009 with
existing creditors, depending on market conditions. The plan also
allows Astra to raise between $100 and $150 million through a
rights issue in January, part of which will go to repaying debt.

Astra's debt pact with creditors gives the company breathing
space to continue operating without the threat of falling into
default, said Ferry Wong, an analyst at BNP Paribas in Jakarta.
But the company, which is 32 percent owned by Singapore's Cycle &
Carriage Ltd., must push ahead with planned asset sales next year
to reduce its still hefty debt, he added.

Plans to sell part of the company's 51 percent stake in a
local car-making joint venture with Japan's Toyota Motor Corp.
have been in the cards for the past year. Astra has said its in
preliminary talks to sell majority control in the business to
Toyota, but added it wouldn't do so at a fire-sale price.

Creditors have complained about Astra's slow pace of asset
sales since the 1997-98 Asian financial crisis, and the ensuing
collapse of the rupiah ballooned the company's foreign debt in
local currency terms.

Astra was able to reach a restructuring agreement with
creditors in 1999, but less than stellar car sales in recent
years and the failure to sell assets, in part due to the poor
investment climate in Indonesia, meant the company had to go back
to its creditors.

Last month, Astra's creditors failed to turn up in sufficient
numbers for a similar vote in Singapore amid talk that a number
of the company's bondholders were not willing to accept a plan
which asked them to reschedule debt, and had no provisions for
assets sales. Japanese and European banks, which control the
steering committee, including ABN Amro Holding NV (ABN) and BNP
Paribas SA from Europe and three Japanese banks, Mizuho Holdings
Inc., Sumitomo Mitsui Banking Corp. and UFJ Holdings Inc., agreed
to the plan earlier this year.

"I think they (bondholders) eventually realized that it was in
the best interests of every lender as well," Astra Finance
Director John Slack told reporters. "There's no quick solutions,
no ability to get a better deal out of Astra at this juncture."

Under the debt plan, Astra plans to repay $75 million by Dec.
31, about half the amount which is set to come due this year. The
company will repay on average, between $70 million and $100
million every year thereafter through 2006. At that time, the
company will attempt to refinance the remaining debt.

The rights issue in January will go to helping repay this
debt, and perhaps to repurchase some debt on the secondary bond
market, Slack said.

Astra plans to detail its rights issue plans Dec. 17 in
Jakarta, and will then seek approval from its shareholders Dec.
20 to proceed with the issue.

Cycle & Carriage has indicated it will subscribe to its full
share of the issue.

"There are other standby buyers who've indicated interest as
well," Slack said, although he declined to name them.

Astra expects the rights issue to be priced between Rp 500
(5.6 cents) and Rp 2000, with UBS Warburg, JPMorgan Chase Bank
and ING underwriting the issue, Slack said.