Salim Group to take over debts of Indomobil

JAKARTA (JP): Publicly listed auto firm PT Indomobil Sukses International plans to issue Rp 337.38 billion (US$42.1 million) worth of convertible bonds to its majority shareholder, the Salim Group.

The company's investor relations officer Alex Sutisna said on Monday the bonds would replace its debt to Bank Central Asia (BCA), Bank Risjad Salim International (RSI) and component supplier PT Indojaya Tatalestari, which were taken over by the Salim Family.

"The Salim Family and Indomobil signed Transfer of Contract Agreements on Feb. 5 and April 26, which state that the Salim Family will take over Indomobil's debts to BCA, RSI and IJTL," Alex said.

Salim took over Indomobil debt to BCA and RSI, following the takeover of the two banks by the government last year and earlier this year.

The government took over BCA in August last year and RSI in March after the two banks could not return the government's massive liquidity credits injected into the banks.

Following the takeover, the government demanded the Salim Group, as the majority owner, pay the loans the banks extended to companies under the group.

The Salim Group has paid some of the debt in cash and pledged various assets to the government, including shares in a number of companies to repay the remaining debt.

Details concerning the cash amount paid to the government and the type of assets pledged by the Salim Group has never been made public.

Alex said the debt takeover would cut down the company's interest costs, enabling the company a better chance to restructure its debt through a debt-to-equity swap scheme.

He said the bonds would have an eight year maturity period, with zero coupon rates. They could be converted into Indomobil shares starting at the end of the third year until their maturity date.

"The zero coupon rate is meant in order not to burden the company's cash flow for at least three years," Alex told The Jakarta Post.

"We are now discussing further details of the terms and conditions of the bonds, so as to try and make it simple and not too burdensome to the Salim family as well."

Issuance of the bonds, however, awaits the company's shareholders meeting slated for June 30, Alex said.

Indomobil became listed on the Jakarta Stock Exchange through a backdoor listing in 1997 after merging with listed PT Indomulti Inti Industri. (udi)