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.