Astra Unit Delays $318m Bond Sale Plan

Astra International’s automotive financing arm says it needs three months to decide whether it will sell more bonds to finance loan expansion, with its decision hinging on the impact of a new down payment rule and a volatile debt market.

Astra Sedaya Finance sold Rp 5 trillion ($530 million) worth of bonds in February but has secured approval from the country’s capital market regulator to raise a total of Rp 8 trillion from multiple bond sales.

The company will announce in three months whether it will sell more bonds, after reviewing the effects of a regulation that requires consumers to put down a higher down payment on auto purchases through loans, said ASF’s corporate strategy chief, Welfizon Yuza.

“Currently, it [the regulation] is in effect, but the impact isn’t visible yet,” he said, adding that loan demand for automotive purchases remained high.

According to Bank Indonesia data, about 70 percent of automotive purchase are financed through loans.

Since June 15 the central bank and the Finance Ministry have required financiers, including banks and multifinance companies, to ask for a higher down payment from consumers to improve loan quality and prevent a bubble in the sector.

Down payments were raised to between 25 percent and 30 percent of the price tag for cars and motorbikes.

Previously, no specific government guidelines were given, but industry practice typically required a down payment of about 10 percent to 15 percent.

Welfizon said ASF aimed to disburse a total of Rp 22 trillion in loans for cars and heavy equipment this year. In the first half it disbursed Rp 10.8 trillion, a 17 percent increase from the previous year.

The Rp 5 trillion in proceeds from the February bond issuance and bank loans will help the company finance its loan expansion, he added.

The country’s corporate bonds rose 16 percent to Rp 8.25 trillion in the first quarter, compared to Rp 7.1 trillion in the same period a year earlier, data from the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) showed.

However, the recent worsening of the debt crisis has caused some Indonesian companies to adopt a wait-and-see approach as they observe investors’ desire to buy assets in emerging markets.

The yield on the government’s benchmark 10-year bonds increased 0.07 percentage point on Friday, to 5.79 percent, according to Bloomberg data.

Higher yields mean investors are cautious about investing and asking for a greater return to cover their investment risk.

Investor Daily