APP debt restructuring plan rejected by foreign bondholders<\/p>\n
Dow Jones, Jakarta<\/p>\n
Hopes for a quick resolution to Asia Pulp & Paper Co.'s (APP)
\ndebt woes took a blow Monday when foreign bondholders said they
\ncould not accept the terms of a recent plan to restructure the
\nborrowings of the company's Indonesian units.<\/p>\n
A steering committee representing the bondholders said in a
\nstatement that they've rejected a plan outlined last week under
\nwhich creditors would be asked to sign a restructuring deal by
\nMay 31 for the US$6.5 billion debt held by APP's four Indonesian
\noperating units.<\/p>\n
\"The Bondholder Steering Group does not support the
\nrestructuring terms...nor can it encourage other creditors to
\nsupport such terms,\" the statement said.<\/p>\n
Bondholders have drawn up an alternative plan, which they have
\nhanded to APP, it added.<\/p>\n
The bondholders account for about a fifth of APP's total $13.9
\nbillion borrowings, on which the company called a debt standstill
\nin early 2001.<\/p>\n
As such, their disagreement with the plan on the table looks
\nset to complicate efforts to resolve one of the largest bad-debt
\nproblems in emerging markets.<\/p>\n
In part, APP's complicated business network and huge number of
\ncreditors is making it difficult to reach a consensus debt plan.<\/p>\n
APP is based in Singapore and has operations in Indonesia and
\nChina. Its creditors range from institutional bondholders to
\ngovernment agencies and foreign banks.<\/p>\n
Indonesian Bank Restructuring Agency (IBRA), a government
\nentity which is among APP's largest single creditors with $1
\nbillion in debt, announced earlier this year it was taking over
\nthe restructuring of APP's Indonesian units.<\/p>\n
IBRA is under pressure from the government to raise money to
\nfill a huge budget deficit.<\/p>\n
Last week, APP released the details of the IBRA-sponsored
\nplan, which includes debt rescheduling over 10 years for part of
\nthe debt, and a mechanism to siphon off profits from the company
\nin excess of operational needs to repay creditors.<\/p>\n
The plan also promises faster repayments for creditors that
\nsign up by the May 31 deadline.<\/p>\n
APP and IBRA have said they hope creditors will sign a
\npreliminary agreement Dec. 18.<\/p>\n
But the bondholders are concerned that IBRA's plan doesn't
\ncontain adequate provisions to ensure Indonesia's Widjaya family,
\nAPP's founding shareholders, keep to the repayment terms of any
\nrestructuring.<\/p>\n
The bondholders said their alternative debt plan states
\nclearly that creditors will take \"automatic and immediate\"
\nmanagement control of APP in the case of a future default.<\/p>\n
The creditors want APP to hand a majority stake in the company
\nto an independent offshore custodian during restructuring, said a
\nperson close to the group.<\/p>\n
Bondholders are concerned that only IBRA will be sure of
\nrepayment under the plan, while Indonesia's legal system is
\ninadequate to protect foreign creditors, the person said.<\/p>\n
The group's plan also proposes the Widjaya family should
\npledge more assets that are currently not under the APP umbrella
\nas security during the restructuring. The Widjayas have assets in
\nSingapore, where they reside, and China, people close to the
\ntalks say. IBRA's plan makes no mention of these assets, the
\nbondholder group says.<\/p>\n
Bondholders are also concerned that IBRA's plan pushes for the
\nrestructuring of the Indonesian debt without working out a plan
\nfor the Singapore holding company and China company borrowings,
\nwhich total about $7.4 billion.<\/p>\n
Creditors holding debt from those companies might suffer, they
\nsay. The alternative plan also stipulates that minimum repayment
\namounts should be fixed in advance for all debt.<\/p>",
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"sponsor": "Okusi Associates",
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