Restructuring agency ousts Astra chief
Financial Times ; 09-Feb-2000

The Indonesian Bank Restructuring Agency (Ibra) yesterday won its battle against the chief executive of leading local carmaker Astra International yesterday when shareholders voted to oust her and the company's finance director.

As expected, Ibra used its control of 45 per cent of Astra's shares to secure a majority vote against Rini Soewandi, company president, who had blocked the state agency's plans to sell its stake to a group of US investors. Ibra needs to sell assets to raise cash for Indonesia's bank rescue programme. The agency is under pressure to sell the Astra stake by March 31.

Astra is a diversified conglomerate which is a market leader in its core business of making cars, vans and motor cycles. Ms Soewandi was replaced by Theodore Rachmat, the former Astra chief executive whom she replaced in 1998. He denied any link between his appointment and Astra's founders, the Soeryadjaya family.

Three Ibra staff were appointed to Astra's eight-member board of commissioners, which is similar to a board of directors. The meeting also approved an issue of new shares by Astra in the middle of this year, to help it meet debt service costs.

The change in management is not expected to affect Astra's operations or its strategy, which is shaped by its need to repay foreign debts of more than Dollars 1bn. Astra shares closed slightly lower at Rp3,775 yesterday after making gains in the wake of the meeting. Both Ibra and Ms Soewandi have maintained that they were acting in the interests of good corporate practice. Nonetheless, the market sees their dispute as partly due to a proxy battle which pits the Soeryadjayas against Muslim business interests. Although the ousting of Ms Soewandi should bring an end to mutual accusations of lack of transparency, it has upset investors on both sides.

Since the withdrawal last week of a bid by Ibra's preferred investor, a pairing of two US fund managers, the bidding has been thrown open. Ibra hopes to close a sale by March 25.

Astra International, Indonesia's biggest car maker, said yesterday that it would no longer try to block the sale of around 45 per cent of its shares by the government, removing an obstacle to the latter's much-delayed programme of asset sales.

"We'd never want to see that Astra became another Bank Bali," said Rini Soewandi, chief executive, who is expected to be replaced by shareholders today after falling out with the Indonesian Bank Restructuring Agency (Ibra), which controls the 45 per cent stake. Some of the shares are owned directly by Ibra, and the agency has control of the remaining shares, which are being transferred to the government by businessmen in lieu of unpaid bank debts.

Ibra's plans to sell part of Bank Bali to Standard Chartered Bank collapsed in December because of resistance from the local bank's management. Fears of a repeat performance with Astra rose last week after a US investment group dropped its bid for Ibra's shares in the company. Ibra has made slow progress in its efforts to raise cash for Indonesia's bank recapitalisation programme by selling billions of dollars worth of nationalised assets, though the agency expects to meet its fundraising target for the year to March. Newbridge Capital and Gilbert Global Equity Capital of the US dropped their bid of Rp3,750 a share after Astra refused to provide detailed data for due diligence. Astra said the demands for information were too intrusive and that Ibra's decision late last year to appoint the US group as preferred bidder was "non-transparent". Ibra officials concede that they could have published more information about their negotiations with Newbridge and Gilbert, but they maintain that the bid was the best available at the time and accuse Astra's management of trying to slow down the sale for its own reasons.

Ms Soewandi denied the latter charge yesterday in an open letter to President Abdurrahman Wahid, who is abroad. "Any measure taken by the management is solely to maintain Astra's integrity," she said. She also denied allegations of improper business dealings by Astra's management, which have been widely reported in the local press. "We have always done the transactions as openly as possible," she said.

Ibra is thought to have the votes it needs to have Ms Soewandi replaced at today's extraordinary shareholders meeting, as long as it attracts a quorum, though it is not yet clear whether other executives will also be asked to step down.

Analysts believe the tug of war over Astra reflects a wider struggle between rival Indonesian business interests for control of top companies, many of which have been taken over by Ibra in lieu of unpaid bank debts which are owed by their shareholders. Bidding has now re-opened for the Astra stake, which Ibra has to sell by 31 March to meet a budget target.

Five potential bidders have already replied to the 40-50 invitations sent out by Ibra. They are understood to include a group led by Lazard Fre`res, another led by Philippines-based JG Summit Holdings and a partnership of George Soros and a local finance firm. An Ibra source said Newbridge and Gilbert might also bid again.

Astra makes motor vehicles in partnership with leading Japanese firms, and its other interests include agribusiness, information and financial services. Ibra expects to get at least Rp4,000 a share, though some analysts in Jakarta value the company at up to Rp5,000 a share. Astra is generally regarded as one of Indonesia's best-run businesses and returned from the red last year with a net profit of Rp809bn (Dollars 108m). Unlike most local conglomerates, it has already rescheduled its more than Dollars 1bn in debt.

Today's shareholder meeting will also consider a share issue by Astra later this year to help it cover the cost of servicing debt this year. Dorys Herlambang, chief financial officer, told reporters that Astra was also negotiating to sell down stakes in its motorcycle and telecommunications ventures to foreign partners.

Debt Restructuring Compled to Date by Astra International and Its Subsidiaries
 

1.	PT Astra International Tbk, completed at June 1999 in amount of US $ 1,149 mio. Subsidiaries and Affiliated Companies:
2.	Astra Graphia, completed at December 1999 in amount of US $ 82 mio.
3.	Bina Busana Internusa, completed at February 1999 in amount of US $ 1 mio
4.	Federal International Finance, completed at December 1999 in amount of US $107 mio.
5.	Traktor Nusantara, completed at December 1999 in amount of US $ 21 mio.
6.	Fuji Technica Indonesia, completed at September 1999 in amount of US $16 mio.

Astra's Objections to an Acquisition Bid by Newbridge
From an Astra press release

PT Astra International Tbk, has been working not only with IBRA and its Investor Group (the Newbridge Asia/Gilbert Global Equity investor group), but also with its legal advisors, to establish a reasonable basis for the conduct of due diligence in connection with the proposed acquisition of Astra shares by the investor group. Astra’s legal advisors are Freshfields, Shearman & Sterling and Makes & Partners.

In this regard, Astra has fully considered the issues raised by the investor group, and the steps that need to be taken in order to protect the interest of the various stakeholders in the Astra Group.
 
Astra recognizes that through the sale of Astra shares which are under IBRA’s control, IBRA will always seeks to protect the national interest, both short term interests such as meeting Indonesia’ fiscal budget but also the long term interests such as to preserve Astra as a national asset.

Under Indonesia law and international standards, Astra is not obliged to provide access to non public and confidential information to parties who wish to purchase existing shares of Astra in a secondary market transaction, however large transaction might be. Astra is prepared to provide selected documents and information requested by investor group. Astra cannot provide information pertaining to :

• Pro forma financial statements
• New product development
• Pricing strategy and costing
• Information which would breach its confidentiality obligations to existing business partners. The data has been ready for due diligence by the investor group since December 20,1999.

The Investors have not submitted Confidentiality Agreement

Astra will require each investor to execute a Confidentiality Agreement (CA) which is in accordance with Bapepam regulations and international standards. The CA is important for Astra to protect itself against any confidential material being used against it to Astra’s commercial disadvantage in the future.

There are several key issues still pending relating to the CA :
 
 

a.	Indemnity Astra is asking the investor group to provide an indemnity to the relevant Astra Group companies, their directors, commissioners and employees against any claim that they may suffer as a result of providing due diligence information to the potential investors
b.	Statement of investor intention In light of the sensitivity of the material to be disclosed and commitments to existing business partners, Astra will require inclusion of a provision in the CA which requires the investor groups to disclose their intentions publicly in respect of the acquisition of Astra shares and specifically, in accordance with BAPEPAM disclosure requirements, to disclose their strategy in respect of the future business, operations, management and control of Astra, prior to the investor group entering into any contracts with IBRA, to acquire Astra shares under IBRA’s control.
c.	Limitation on Disclosure Investor will be required to commit to refrain from sharing due diligence materials with Astra competitors and major creditors. This pending issue is expected to be settled soon, so that the due diligence can be commenced afterward.

Astra International PT. is a diversified holding company with interests in automotive, heavy equipment, agribusiness, electronics, financial services and other consisting of wood-based industry group. The automotive division sells motor vehicles of various types like Daihatsu, Isuzu, BMW, Peugeot and Nissan diesel. It also exports these cars to various countries. Its financial services division deals with banking, consumer financing, leasing, credit card and insurance facilities. Automotive accounted for 76% of 1996 revenues; financial services, 11%; electronics, 9%; agribusiness, 3% and heavy equipment and other 1%.

Sales levels dropped significantly in the third quarter of 1999 versus the previous year's third quarter. During the third quarter of 1999, sales at PT Astra International TBK totalled 3.51 trillion Indonesian Rupiahs. This is a drop of 58.8% from the 8.51 trillion Indonesian Rupiahs in sales at the company during the third quarter in 1998.

PT Astra International TBK reported sales of 11.29 trillion Indonesian Rupiahs (US$1.51 billion) for the year ending December of 1998. This represents a sharp decrease of 28.9% versus 1997, when the company's sales were 15.87 trillion Indonesian Rupiahs. Note that inflation was high in Indonesia in 1998. According to the International Monetary Fund, consumer prices rose 60.7% in 1998. The sales growth of -28.9% is distorted because of inflation.

 Contributing to the drop in overall sales was the 40.6% decline in Financial Services, from 1.83 trillion Indonesian Rupiahs to 1.08 trillion Indonesian Rupiahs. There were also decreases in sales in Heavy Equipment (down 9.0% to 157.90 billion Indonesian Rupiahs) and Other (down 2.4% to 39.56 billion Indonesian Rupiahs) . However, these declines were partially offset by the increase in sales of Automotive (up 479.0% to 7.09 trillion Indonesian Rupiahs) and Electronics (up 15.6% to 1.30 trillion Indonesian Rupiahs) .

PT Astra International TBK currently has 123,000 employees. With sales of 11.29 trillion Indonesian Rupiahs (US$1.51 billion) , this equates to sales of US$12,302 per employee. This is a great deal lower than the three comparable companies, which had sales between US$689,411 and US$1,268,782 per employee. Note that some of the figures stated herein could be distorted based on exact classification of employees and subcontractors.

The stock price has more than doubled recently: For the 52 weeks ending 2/4/00, the stock of this company was up 362.5% to 3,700.00 Indonesian Rupiahs. (Note that this country had inflation of 60.7% in 1998). During the past 13 weeks, the stock has increased 3.5%. During the past 52 weeks, the stock of PT Astra International TBK has increased at a rate that is much faster than the three comparable companies, which saw losses between 2.6% and 22.1%.

During the 12 months ending 9/30/99, earnings per share totalled 1,194.22 Indonesian Rupiahs per share. Thus, the Price / Earnings ratio is 3.10. These 12 month earnings are greater than the earnings per share achieved during the last fiscal year of the company, which ended in December of 1998, when the company reported earnings of -1,047.01 per share.

The P/E ratio of 3.1 is much lower than the P/E ratios of all three comparable companies, which are currently trading between 18.5 and 39.3 times earnings. This company is currently trading at 0.76 times sales. This is at a higher ratio than all three comparable companies, which are trading between 0.16 and 0.17 times sales. This company has negative book value (and thus a price to book value would not make any sense).

The market capitalization of this company is 8.60 trillion Indonesian Rupiahs (US$1.15 billion) . The capitalization of the floating stock (i.e., that which is not closely held) is 6.45 trillion Indonesian Rupiahs (US$864.72 million) .

At the end of 1998, the company had negative common shareholder's equity of -1.45 trillion Indonesian Rupiahs. This means that at the present time, the common shareholders have essentially no equity in the company. This is further compounded by the fact that among the assets the company does have on its balance sheet, there are 403.91 billion Indonesian Rupiahs in intangible assets. This company's total liabilities are higher than total equity, which means that the money this company owes are greater than all of the assets of the company.

As of December 1998, the company's long term debt was 11.37 trillion Indonesian Rupiahs and total liabilities (i.e., all monies owed) were 22.40 trillion Indonesian Rupiahs.

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
(In Millions of Indonesian Rupiah Except Par Value)

A S S E T S	1999 (Un-audited)	1998 (Un-audited)		LIABILITIES AND STOCKHOLDERS' EQUITY	1999 (Un-audited)	1998 (Un-audited) Re-stated
AUTOMOTIVE AND NON-FINANCIAL SERVICES				AUTOMOTIVE AND NON-FINANCIAL SERVICES
CURRENT ASSETS				CURRENT LIABILITIES
Cash and cash equivalents	3,604,159	2,829,064		Short-term loans	2,208,292	5,619,985
Short-term investments - net	281,966	1,006,404		Accounts payable
Restricted cash	259,545	0		Trade
Accounts receivable				Related parties	301,490	271,882
Trade				Third parties	698,967	1,116,560
Related parties	62,836	18,577		Others
Third parties - net of allowance for doubtful account	1,229,046	1,375,549		Related parties	309	88,119
Others				Third parties	508,540	393,500
Related parties	15,190	30,581		Customers' deposits	157,472	128,480
Other	593,323	168,703		Accrued expenses	500,821	879,017
Inventories - net	1,546,382	2,109,254		Taxes payable	231,312	415,612
Advance payments	373,899	573,127		Current maturities of
Prepaid taxes and expenses	58,316	387,110		Bank loans and others	2,127,623	1,406,964
				Reforestation loan	222,456	220,802
Total Current Assets	8,024,662	8,498,369		Obligations under capital lease	43,174	83,113
				Total Current Liabilities	7,000,456	10,624,034
DUE FROM RELATED PARTIES - Net of allowance for doubtful accounts	46,389	154,363
				DUE TO RELATED PARTIES	48,111	,685,820
BOND SINKING FUND	51,610	100,377
INVESTMENTS - Net of allowance for decline in value	1,875,171	1,374,849		DEFERRED INCOME - Net	2,630	38,791
INDUSTRIAL TIMBER PLANTATIONS - Net	315,838	0		DEFERRED TAX LIABILITIES	1,435,079	1,672,193
INDUSTRIAL TIMBER PLANTATIONS UNDER DEVELOPMENT STAGE	49,594	386,917		LONG-TERM DEBTS - Net of current maturities
				Bank loans and others	7,909,560	10,517,135
				Bonds and notes	3,905,558	4,127,500
PROPERTY, PLANT AND EQUIPMENT - net of Carrying value	9,279,166	11,056,281		Obligations under capital lease	74,617	116,946
Accumulated depreciation	2,708,606	2,555,389		Accrued interest	17,453	0
Net Book Value	6,570,560	8,500,892
				Total Long-term Debts	11,907,188	1,4761,581
				CONVERTIBLE BONDS	45,043	856,855
ASSETS NOT YET USED IN OPERATION	553,143	397,563		Total Liabilities - Automotive and Non-Financial Services	20,438,507	29,639,274
GOODWILL - Net	272,942	562,212		FINANCIAL SERVICES
				Loans payable	2,077,635	,6824,658
				Deferred tax liabilities	16,028	5,330
				Deposits	0	5,290,017
				Other liabilities	390,352	994,607
FORWARD EXCHANGE CONTRACT - Net	313,640	4,608,437
				Total Liabilities - Financial Services	2,484,015	13,114,612
DEFERRED TAX ASSET	2,295,493	2,503,875
				DEFERRED FOREIGN EXCHANGE DIFFERENCES	2,846,887	3,373,069
OTHER ASSETS
Claims for tax refund	197,827	98,704
Long-term loans to officers and employees	86,395	87,518
Deferred charges - net	56,173	116,694
Others	107,955	81,470
				MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES	1,457,623	1,384,149
Total Other Assets	448,350	384,386
				STOCKHOLDERS' EQUITY
				Capital stock - par value of Rp 500
Total Assets - Automotive and Non-Financial Services	2,0817,392	27,472,240		Authorized - 6,000,000,000 shares
				Issued and fully paid - 2,449,837,668 shares in 1999
				and 2,325,662,474 shares in 1998	1,224,919	1,162,831
				Additional paid - in capital	172,013	172,013
				Other paid - in capital - rights	103,359	0
FINANCIAL SERVICES				Revaluation increment in property, plant and equipment	346,504	346,504
Cash and cash equivalents	1,247,470	1,502,365		Capital transaction of affiliates	784,691	761,451
Receivables - net of allowance for doubtful accounts	1,338,268	12,349,241		Cumulative translation adjustments	1,814	1,002
Deferred tax assets	152,977	157,082		Unrealized gain on investment	60,069	0
Others assets - net	444,325	1,184,983		Retained earnings (deficit)
				Appropriated	0	0
				Unappropriated	0	0
Total Assets - Financial Services	3,183,040	15,193,672
				Total Stockholders' Equity	2,689,741	2,443,801
TOTAL ASSETS	24,000,432	42,665,912		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	24,222,999	43,208,767

 

CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(In Millions of Indonesian Rupiah Except Net Income (Loss) Per Share)
 

	1999 (Un-audited)	1998 (Un-audited) Re-state
AUTOMOTIVE AND NON-FINANCIAL SERVICES
Net Revenues
Automotive	7,131,646	5,411,985
Electronics and consumer goods	976,273	1,795,665
Agribusiness	639,316	575,805
Heavy equipment	145,732	108,425
Woodbased	592,521	577,325
Others	24,779	41,761
Total Revenues	9,510,267	8,510,966
Cost of Revenues	7,310,375	5,880,539
Gross Profit	2,199,892	2,630,427
Equity in Net Income (Losses) of
Associated Companies	219,124	146,751
Operating Expenses	914,430	1,035,798
Income from Operations	1,504,586	1,447,878
Other (Income) Charges
Financing charges	1,485,086	4,579,764
Interest income	336,248	641,243
Gain on repurchase and repayment of bonds and loans	113,724	0
Miscellaneous - net	72,903	83,340
Other Charges - net	1,108,017	3,855,181
Income (Loss) Before Provision for Income Tax -
Automotive and Non-Financial Services	396,569	2,407,303
FINANCIAL SERVICES
Revenues
Consumer financing	34,2510	582,437
Interest income	200,000	2,051,822
Lease income earned	14,712	42,970
Provision and commission	8,308	70,560
Others	47,190	41,591
Total Revenues	612,720	2,789,380
Equity in Net Income of Associated
Companies	178	8,965
Expenses
Financing charges	383,651	2,726,005
General and administrative expenses	128,209	266,843
Provision (reversal of allowance) for doubtful accounts
and decline in value of repossessed assets	8,212	15,159
Total Expenses	503,648	3,008,007
Income (Loss) Before Provision for Income
Tax - Financial Services	109,250	209,662
TOTAL INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAX	505,819	2616,965
PROVISION FOR INCOME TAX
Automotive and Non - Financial Services
- Current Tax	135,095	150,384
- Deferred Income Tax	131,128	802,826
Total Automotive an Non Financial Services	3,967	652,442
Financial Services
- Current Tax	12,012	611
- Deferred Income Tax	386	10,508
Total Financial Services	12,398	9,897
TOTAL PROVISION FOR INCOME TAX	16,365	662,339
INCOME (LOSS) BEFORE MINORITY INTEREST	489,454	1,954,626
MINORITY INTEREST IN NET INCOME (LOSS) OF SUBSIDIARIES	159,005	110,539
NET INCOME (LOSS)	330,449	1,844,087
Net Income (Loss) Per Share	135	792