Astra to stop paying interest on foreign loans
Astra to stop paying interest on foreign loans
SINGAPORE (Agencies): PT Astra International, parent company of one of Indonesia's biggest business groups, informed foreign bankers here Thursday that it has to stop paying interest on about US$1.4 billion in group loans, effective immediately.
Executives of Astra, Indonesia's dominant automotive concern, told its creditors that sales have been so slow this year -- down 90 percent from a year earlier -- that some companies in the group don't have the operating cashflow to cover payments of interest and principal on their loans.
Rini Soewandi, Astra' president-director, who was here to meet with Astra's creditors, said that repayment is being halted on 70 percent of the group's total foreign loans of about $2 billion.
The loans on which payment has been stopped include $1 billion in loans to PT Astra International itself and on another $400 million in loans to affiliated companies. Astra units that account for 30 percent of the total foreign loans can keep servicing them, she said.
Included in the US$1 billion on which Astra International is stopping repayment is $320 million that's outstanding on three Eurobonds that the company launched in recent years. The bonds are listed on the Luxembourg Stock Exchange.
An Astra statement said that "as a result of the macroeconomic downturn in Indonesia, interest under the current terms of its facilities will be temporarily deferred until a restructuring plan is approved by the creditors."
A similar statement, signed by Astra's vice president for public relations Aminuddin and issued in Jakarta on Thursday, listed several measures already taken by the company to revitalize its operations and strengthen capital structure.
Among the measures were the sale of Astra Microtonics, the sale and dilution of a 25 percent portion of Astra Daihatsu Motors, the retrenchment of 25,000 employees and the implementation of an ongoing cost reduction and control program.
Representatives of more than 100 Astra creditors attended Thursday's meeting in Singapore. Astra executives told them that it expects to present a restructuring plan on Nov. 6. The executives say that a key part of the proposed restructuring will be to stretch out repayment of existing loans for five years.
The group units that can no longer pay interest include three companies listed on the Jakarta Stock Exchange: PT Astra International itself; PT Astra Graphia, whose main business is photocopiers; and PT United Tractors, whose business is heavy equipment.
The other companies on the list are: PT Lintas Adhikrida, PT Non-Ferindo Utama Aluminum Alloy, PT Fuji Technica Indonesia, PT Berau Coal, PT Pandu Dayatama Patria, and PT United Tractors Pandu Engineering.
Among Astra affiliates that can continue paying their debts on schedule are PT Astra Agro Lestari, a listed palm oil producer; PT Toyota Astra Motors, a joint venture with Toyota Motor Corp. to produce vehicles; and PT Federal Motors, which is Astra's main motorcycle-producing unit.
Astra's statement said that it has appointed three financial advisers for its restructuring: Chase Manhattan Asia Ltd., Sakura Merchant Bank Ltd., and Sumitomo Bank Ltd.. Soewandi said that the bulk of the group's creditors are Japanese and European banks.
Bankers said once the company's debt restructuring proposal was presented to creditors negotiations could begin and possibly last for two to three months, depending on whether the large group of creditor banks would be able to reach any kind of consensus.
"Astra itself has many things which it needs to be cleared up. They are having some negotiations with (central) Bank Indonesia in terms of the group's bank," added one of the bankers taking part in the meeting.
"They will have to clarify that issue first, so we will have to wait until November," he said.
Bankers said, however, that Astra had not requested a "haircut" or debt forgiveness, which was a good sign.
The aim of the restructuring would be to limit lenders' concerns about cash controls and to maximize debt repayment while allowing time for the company to recover, the Astra statement said.
Some of the bankers lauded what they called Astra's transparency in terms of company affairs and its professionalism in the handling of its debt repayments.