Astra International unlikely to be declared bankrupt

Astra International unlikely to be declared bankrupt

JAKARTA (JP): The country's largest automaker, PT Astra
International, is unlikely be taken to bankruptcy court by its
creditors despite the current stalemate in debt talks, a joint
venture securities house has said.

Vickers Ballas Tamara Securities said in a daily market review
that Astra's offshore creditors, impatient with the lack of
resolution to Astra's huge debts, would not be able to recover
most of their money if the company was declared bankrupt.

"The possibility of offshore creditors taking Astra to
bankruptcy court is small as settlement (in the commercial court)
would probably be substantially lower than Astra's proposed debt
forgiveness," Vickers Ballas said.

"Despite this, debt negotiations, which have been ongoing
since September last year, continually ended in a deadlock,"
Vickers Ballas said.

Publicly listed Astra International proposed a partial payment
of interest on about US$2 billion in overseas debts, seeking to
break an impasse in its talks with its offshore creditors, mostly
Japanese banks.

Astra's president Rini M. Soewandi said last week that the
company would also establish a special fund to pay off those
demanding immediate repayment and who were willing to write off
about 30 percent to 40 percent of the money owed to them.

Vickers Ballas Tamara said part of the funds would be derived
from the divestment of several of its subsidiaries, including
chip producer PT Astra Microtonics Technology in Batam.

Astra sold 100 percent of its stake in Microtonics for $90
million last year to foreign investors as part of the company's
management and debt restructuring in an effort to weather the
current crisis, the worst the country has ever seen.

Astra International, helped by its financial advisors Chase
Manhattan Asia Ltd., Sakura Merchant Bank Ltd. and Sumitomo Bank
Ltd., told its creditors in October last year that it would stop
servicing interest payments until it reached an agreement with
creditors to restructure its debt.

Astra is saddled with a total of $2 billion in overseas debts
and about Rp 2 trillion ($250 million) in rupiah-denominated
debts.

But negotiations with its foreign creditors stalled in
December last year when the Sanwa bank-led consortium and Tokai
bank refused to accept a suspension of interest payments.

The two firms, which Astra owes $200 million and $10 million
respectively, had declared Astra in default and were demanding
full and immediate payment.

An executive at Astra International, who requested anonymity,
said last week that the company would meet its creditors again
next month to restructure its debts either in Singapore or Japan.

Astra is one of many Indonesian indebted firms having
difficulties repaying debts following the rupiah's sharp
deprecation by as much as 80 percent against the American dollar
last year.

The rupiah, which slumped to its lowest level of 17,000 to the
dollar in January last year, now hovers around the 8,000 mark.

The country's private corporate debt stands at about $64
billion.

Analysts said that debt negotiation of the country's private
debt would be tough amid the economic turmoil.

They said talks between Astra and its creditors, if they
resumed, would be tough. Any decision to restructure debts and
discontinue or continue interest and principal payments to
creditors should be made in a unanimous agreement among
creditors.

Some creditors were more lenient than others and were willing
to continue with the existing debt negotiations, Vickers Ballas
said. (aly)