Astra restructures over $1.1b in debt

Astra restructures over $1.1b in debt

JAKARTA (JP): After 11 months of hard negotiations, auto giant
PT Astra International finally signed agreements on Wednesday
with its bank creditors and bond holders to restructure some US$1
billion and Rp 1 trillion in debts, including capitalization of
interest.

Astra president Rini M.S. Soewandi said the agreement on the
company proposed debt restructuring program, the first by a major
Indonesian business group, reflected the confidence of creditors
and bond holders in Astra's performance which was gradually
moving on the path to recovery.

"The creditors and bond holders acknowledge that our company's
decline in performance was due not to mismanagement, but rather
to the economic crisis sweeping across the region, including
Indonesia," Rini said in her speech at the ceremony of the
signing.

Government officials and foreign creditors saw the
restructuring agreement on such a complex debt structure
involving some 60 creditors and many bond holders as a landmark
deal not only for Astra but also the country which is struggling
to restructure some $67 billion in overseas corporate debts to
revive confidence in the overall economy.

Chairman of the capital market watchdog (Bapepam) Yusuf Anwar
expected Astra's deal would trigger further debt-restructuring
success stories.

"As more companies reach a restructuring agreement, the
(stock) market will become more vigorous, particularly if the
political excitement is over," he said at a media conference.

Yusuf is also chairman of the government-sponsored Jakarta
Initiative Task Force established 10 months ago to facilitate
debtors and creditors to reach an out-of-court debt settlement.

Chairman of the Indonesian Bank Restructuring Agency (IBRA)
concurred, saying it was in the agency's interest to see more
companies restructure their domestic bank debts.

IBRA controls 40 percent of shares in publicly listed Astra
International. The agency took over the shares from owners of
ailing banks as payment for their debt to the government.

Pieter van den Akker, country manager of ABN-AMRO Bank in
Jakarta, said the benefit from Astra's restructuring deal would
not only be limited to the company as it would provide an impetus
for the restructuring of other companies, which in turn would
boost confidence in the economy.

"It's a landmark deal... It will provide a template for other
restructuring programs," he said.

Rini said the deal was also welcomed by the (stock market),
pointing out that Astra's share price was trading at Rp 900 each
on April 12 but jumped to Rp 4,100 on Tuesday. The stock price,
however, fell to Rp 3,850 on Wednesday as the overall stock
market index dropped.

Rini said the deal would also exempt the company from
delisting criteria stipulated by the Jakarta Stock Exchange (JSX)
for companies with a 1998 net loss of more than 50 percent of
paid up capital.

The JSX included on Tuesday Astra among the 49 companies which
may have to be delisted from exchange.

"We will hold a hearing with the JSX (on the issue)," Rini
said.

Rini added to anticipate the future, Astra's management had
redefined the company's business strategy. It included focusing
on strengthening core competencies in auto distribution and after
sales services, increased export activities utilizing existing
capacity and strengthening natural-based businesses to balance
out the cyclical pattern of the domestic auto industry.

"It has been estimated that 1999 will remain a tough year for
Astra, considering the fact that business in general will not
have completely recovered. Yet, Astra strongly believes that the
situation will begin to balance out in the year 2000," she said.

Astra has become a diversified conglomerate with interest also
in plantations and agribusiness.

Under Astra's debt restructuring proposal, the debts are
divided into three series, with series one totaling $200 million
and Rp 199 billion, series two $705 million and Rp 702 billion
and series three $100 million and Rp 99 billion.

In the debt restructuring framework detailed in its 1998
annual report, Astra offered a three-year repayment period for
the first series, with quarterly interest payments and principal
payments to start at the end of the second year.

"The source of repayment is mainly from asset sales," the
report said.

Under the debt proposal, Astra plans to raise a maximum Rp 3
trillion from asset sales, and after the fifth year, company debt
would be reduced to 50 percent.

The second series has a six-and-a-half year repayment period,
with a three-year principal payment period.

The third series comprises seven-year half-secured loans or
bonds, with warrants. Astra plans to issue warrants that will
convert into shares amounting to 10 percent of the company's
issued share capital. (rei)