APP debt restructuring threatens diplomatic furor<\/p>\n
Dow Jones, Jakarta<\/p>\n
Asia Pulp & Paper Co. Ltd.'s failure to repay its massive debt
\nis threatening a diplomatic row between Indonesia and 11 foreign
\ngovernments that are urging President Megawati Soekarnoputri to
\nintervene in the restructuring.<\/p>\n
Reaching a debt payback agreement for US$6.5 billion owed by
\nAPP's four Indonesian units has become a test case of Jakarta's
\nefforts to reform the country's economy and attract foreign
\ninvestment, the governments said in a letter sent Monday to
\nMegawati's office.<\/p>\n
Until now, the Indonesian Bank Restructuring Agency (IBRA) -
\nwhich is owed $1 billion by APP and is overseeing the
\nrestructuring - has been too lenient on the ailing pulp and paper
\ncompany, the letter said.<\/p>\n
"We advise you to direct your ministers to exercise the
\nclosest possible supervision over IBRA to ensure a fair,
\ncommercially reasonable and transparent restructuring of APP,"
\nthe governments, including European states and Canada, wrote to
\nthe president.<\/p>\n
Export credit agencies of the governments are among hundreds
\nof creditors owed a total $13.9 billion by APP, which is based in
\nSingapore and has operations in Indonesia and China.<\/p>\n
International creditors are frustrated at what they say is
\nIBRA's unwillingness to force stringent repayment conditions on
\nAPP's owners, Indonesia's Widjaya family, people familiar with
\nthe talks say. The Widjayas stopped servicing their debt in March
\n2001 amid slumping global paper prices.<\/p>\n
The governments' letter signals the APP restructuring could
\nbreak out into a diplomatic row if Indonesia refuses to increase
\npressure on the company to repay.<\/p>\n
"APP's restructuring is of high political importance to
\nIndonesia because of its size and the repercussions on
\nIndonesia's international reputation," the letter said.<\/p>\n
An outline debt plan between IBRA and APP signed in December
\nfailed to include provisions to force the company to fully repay
\nits debt, and ensure against a further default, the letter added.
\nIBRA has said it wants creditors to agree to the plan by a March
\n31 deadline.<\/p>\n
Export credit agencies of the governments proposed in February
\nan alternative restructuring that would fix tighter controls on
\nAPP's cash flow, and allow for a takeover of the four Indonesian
\nunits in the event of failure to repay debt in the future.<\/p>\n
But IBRA has been reluctant to include these conditions in its
\nrestructuring, people close to the talks say.<\/p>\n
The governments pointed out to Megawati in the letter that her
\ngovernment would need the cooperation of those export credit
\nagencies to meet its infrastructure spending needs, which are
\nestimated to total $100 billion over the next 10 years.<\/p>\n
"Our government agencies have always supported Indonesia's
\neconomic development and intend to continue doing so," the letter
\nsaid. "However, it is likely that a failure to reasonably satisfy
\nthe creditors of APP will affect the confidence of future
\npotential investors in Indonesia."<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/app-debt-restructuring-threatens-diplomatic-furor-1447893297",
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"sponsor": "Okusi Associates",
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