Astra reduces its debt to US$420 million

Sandy Darmosumarto and Rendi A. Witular, The Jakarta Post, Jakarta

Creditors of the country's largest automotive assembler and distributor, PT Astra International, have agreed to debt release date status later this month as the company has managed to trim its debts by more than half to US$420 million, a senior official said.

The release date status will pave the way for the company to gain flexibility in spending part of its profit on dividend and investment.

Astra's finance director John S.A. Slack told The Jakarta Post recently that the certificate of the release date would be issued within the next two weeks as Astra had cut its debt to below $500 million, as required by creditors.

Based on an agreement made with the creditors, the release date would be granted if Astra managed to cut its debts to the required level from around $1.1 billion in 1999, when the first debt restructuring deal was signed.

"We hope in the next few weeks to get our release date approved... and receive the certificate. With such status we will be given flexibility in the use of our cash.

"We have also been subject to certain restrictions on capital expenditure in the past; the restriction would be no longer in place," said Slack.

With the possible release date in hand, Astra would be able to pay interim dividend to shareholders of around 25 percent of its net profit in December and a final dividend in June next year. The amount of the final dividend has yet to be decided.

The interim dividend will mark Astra's first dividend payment in six years.

Astra's net profit this year was estimated to reach around Rp 4 trillion ($470 million), according to Astra's corporate secretary, Aminuddin.

The release date will also give Astra the freedom to spend more on capital expenditure next year on expansion, because since 1999 the company's investment has been limited due to its huge debt burden.

The company spent $15 million and $45 million on capital expenditure in 2002 and 2003 respectively.

Elsewhere, Slack said there would be a financial impact from the company's recent move in divesting a 46 percent stake in joint-venture auto manufacturer plant PT Toyota Astra Motor (TAM) to partner Toyota Motors Corporation.

He explained that Astra's consolidated revenue this year would be reduced by around 10 percent because of the divestment.

"The impact is small; less than 10 percent of Astra's consolidated revenue," he said.

Astra's stake in TAM has been reduced to 5 percent, while Toyota's stake has increased to 95 percent.