Astra one step closer to debt solution

JAKARTA (JP): PT Astra International, the country's largest automotive firm, won approval from the majority of its shareholders on Thursday to restructure US$946 million and Rp 900 billion ($101 million) in debt.

Shareholders also approved the board of directors' plan to use part or all of the company's assets as collateral for existing or future loans.

However, the Indonesian Bank Restructuring Agency, now the firm's majority shareholder with a roughly 40 percent stake, refused to support the debt-restructuring plan, Astra president Rini M.S. Soewandi said.

"I'm sad after learning that IBRA abstained in the vote, while our foreign shareholders approved our plan," she said.

IBRA assumed 10 percent ownership from Nusamba, which is controlled by Mohamad "Bob" Hasan, 9.27 percent from Indo Artsa Boga, part of the Salim Group, 9.25 percent from Gentala Sanggrahan under Usman Atmadjaja, 7.16 percent from Delta Mustika under Prayogo Pangestu and 1.16 percent from Gajah Tunggal Mulia controlled by Sjamsul Nursalim.

The assets were ceded by their owners to IBRA after their banks failed.

Despite IBRA's abstention, Rini said Astra would proceed with its debt restructuring plan because it gained approval from the majority of shareholders.

"We will meet with the creditors and hold a vote on the restructuring plan on April 21," she said after the company's extraordinary shareholders meeting.

Voting will be based on Indonesia's bankruptcy law guidelines. They stipulate at least half of the company's creditors must participate in the vote and the voting decision must be supported by creditors representing two-thirds of the total outstanding debt.

"We hope to get approval of the majority of our creditors," she said.

She acknowledged that creditors and bondholders were cool to Astra's recent debt buyback offer. The company bought back just $24.3 million of unsecured debt, well below its $150 million target.

Analysts attributed the low turnout to the company's offer to pay only 30 cents per U.S. dollar for the unsecured debt.

"From one side, I'm sad. But from the other, I feel the results are positive because this shows that our creditors want to remain with us," Rini said.

She noted the debt buyback program cost Astra $7.5 million, far shy of the $45 million the company allocated. The remaining $37.5 million will be used to help make resumed interest payments if creditors agree with the company's plan.

If the majority of creditors approve, Rini said, Astra hoped to sign definitive agreements with them by the end of June. Interest payments, frozen since last year, would resume in July.

Rini said there was now $62.5 million cash in hand for interest payments.

According to the plan, all remaining debt will be divided into three tranches.

The first tranche would total $200 million and Rp 235 billion (21 percent of the debt), and the second tranche $647 million and Rp 760 billion (68 percent). The final tranche would consist of $100 million and Rp 117 billion (11 percent).

Astra is proposing a three-year repayment period for the first tranche, with full interest payments and a one-year grace period on principal payment.

The second tranche has a six-year repayment period, with a six-month grace period on interest payments and three-year period of principal payment.

The third tranche consists of seven-year zero coupon loans or bonds, with warrants. Astra plans to issue warrants that will convert into shares amounting to more than 10 percent of the company's issued share capital.

Shareholders also authorized the board to issue new shares of up to 25 percent of Astra's outstanding share capital without proceeding through the rights issue process. The price of the new shares will at least be Rp 1,200.

Astra shares rose Rp 125 to close at Rp 900 on Thursday. (02/rid)