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.