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)