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)