PT Astra International to resume debt repayments

PT Astra International to resume debt repayments

SINGAPORE (Dow Jones): Indonesia's PT Astra International plans to resume interest rate payments on US$1.1 billion in debt starting in July, company President Rini Soewandi said on Friday.

Astra's decision to resume payment follows a poor reception to a buyback offer last month for some of its unsecured outstanding debt.

Rini said that debt restructuring negotiations with creditors are going smoothly and that plans to collateralize Astra's assets by April 21 are underway.

"The buyback offer went very poorly as many creditors expect any restructuring of the debt to offer a better return than the 30 percent we were offering," Rini said.

As part of the restructuring plan, Astra had offered to spend up to $45 million to pay back some of the company's $1.1 billion in unsecured debt. The offer closed March 12.

Astra and creditors are meeting in Singapore to fine-tune the restructuring negotiations, which include efforts to rescind the company's call option on any outstanding zero-coupon bonds and at the same time give bondholders the right to detach warrants immediately.

Rini also said assets sales, however small they may be, are ongoing, to show the company's intent on repaying its outstanding debt.

Astra shocked its bankers last year by halting interest payments on $1.1 billion of its $2 billion debt.

Following the Singapore creditors' meeting Friday, Rini said creditors appear content with how ongoing negotiations are proceeding. Another meeting is scheduled for domestic and European creditors Monday in Jakarta.

That's just three days before a March 25 emergency shareholders' meeting in Jakarta, when Astra directors will seek approval to collateralize company assets that currently feature a negative pledge, meaning they are frozen, Rini said.

If and when Astra's assets are collateralized, company cash flow and the sale of any assets will be used to pay debt, she added.

"The one-on-one meetings with the larger creditors now becomes the more important focus, as each will want to tailor any agreement to fit specific demands," she said.

Rini added that she plans to travel to Tokyo and Europe to meet with creditors before the planned April 21 deadline for finalizing the company's debt restructuring process.

Last month, Astra told creditors that it would adopt Indonesia's bankruptcy law guidelines for reaching agreement on any restructuring process.

Under the proposal, 50 percent of Astra's creditors -- who also represent two-thirds of the outstanding debt -- must be present at a meeting for any agreement to be finalized.

Since then, Astra debt has been "traded heavily" in the secondary market, Rini said, with a number of creditors settling for "large discounts." Those buying the debt are no doubt hoping ongoing debt restructuring plans will provide increased returns, she said.