Market awaits Astra's debt solution

JAKARTA (JP): Analysts have welcomed PT Astra International's plan to restructure its US$1 billion in debt, saying it could set a positive precedent for corporate debt restructuring in the country.

Any delay or failure in Astra's debt restructuring plan would complicate debt solution not only for Astra but also for other companies, they warned.

The approval by Astra's shareholders last week of the company's debt restructuring plan should smooth the way toward a debt solution for the company, they said.

"We are pleased with this progress. This sends a good signal to the market that Astra could get through this process," the associate director and head of equity sales at Bahana, Andre Cita, said on Friday.

Astra earlier said that after getting approval from shareholders, it would meet creditors this week to present them a comprehensive debt restructuring proposal and then hold a vote on the restructuring plan on April 21.

Under the company's restructuring plan, debt totaling some $1 billion would be divided into three tranches, with the first tranche totaling $200 million and Rp 235 billion (21 percent of debt); the second tranche would total $647 million and Rp 760 billion (68 percent of debt); and the third tranche would total $100 million and Rp 117 billion (11 percent of debt).

The plan calls for a three-year repayment period for the first tranche, with full interest payment and a one-year grace period on the principal payment.

The second tranche would have a six-year repayment period, with a six-month grace period on the interest payment and a three-year grace period on the principal payment.

The third tranche would comprise seven-year zero coupon loans or bonds with warrants. Astra would issue warrants which would convert into shares amounting to more than 10 percent of the company's issued share capital.

Apart from this restructuring plan, Astra earlier held a debt buyback which attracted only $24.3 million of unsecured debt.

Astra president Rini M.S. Soewandi said she was confident most of the creditors would approve the company's restructuring plan.

If the plan is approved, some analysts said, Astra would become the first of Indonesia's troubled corporate giants to succeed in overall debt restructuring.

"If Astra -- one of the blue chips on the Jakarta Stock Exchange -- fails in its debt restructuring, I cannot imagine what will happen to other troubled listed companies," one analyst at a local securities house said.

"Therefore, Astra's debt restructuring plan must not fail. It must be successful because it will become the barometer for our corporate debt restructuring."

Another analyst, however, expressed skepticism over the plan. Head of research at BNI Securities, Adrian Rusmana, said the package would not be attractive to creditors.

Regarding the company's plan to issue new shares worth up to 25 percent of issued share capital, Adrian suspected Astra would offer a debt-to-equity deal to creditors.

If the amount of new shares covers the $1 billion debt, it definitely would be unattractive to creditors, he said.

The plan also would affect minority shareholders because the new shares issue, together with the planned warrants issue, would cause a 35 percent delusion in ownership, he said.

Astra shareholders, however, set the price of the new shares at a minimum of Rp 1,200.

Astra shares fell back to Rp 800 on Friday after surging by Rp 125 to Rp 900 on Thursday.

Rini said, however, that Astra had no immediate plan to issue new shares.

"It's only an authorization from shareholders to issue new shares if there is a need. For example, for the purpose of a debt-to-equity conversion requested by creditors."

However, she added no creditors had asked for a debt-to-equity swap during debt restructuring talks.

Rini maintained the debt restructuring plan would not require creditors to write off their debt, and she asserted creditors would be paid back in seven years.

Astra will sell up to Rp 3 trillion worth of assets in three years to support its debt restructuring plan, Rini said. However, if Astra's operation improves significantly within this period, enabling it to service its restructured debt, Astra will not continue selling its assets.

Rini said the company had $62.5 million cash on hand for interest payments, expected to resume in July if creditors agree to Astra's proposal.

"If the deal happens, this will give us more time to settle our obligations and also to improve our performance so Astra will not only be strong in the domestic market but also capable of entering the international market."

"We also hope our debt restructuring plan, if we can achieve it, will encourage corporate restructuring in general, especially in the real sector." (rid)