APP defends its management, reforms in Singapore court<\/p>\n
Hasan Jafri and June Goh, Dow Jones, Singapore<\/p>\n
A court-appointed management to replace the Widjaja family would
\nhinder restructuring at Asia Pulp & Paper Co., which owes
\ncreditors nearly US$14 billion, the company's lawyers said at a
\ncourt hearing Wednesday.<\/p>\n
Lawyers representing the Singapore-registered, Indonesian
\ngroup also argued that a motion to replace the management enjoys
\nlittle support among creditors and that a Singapore court ruling
\nwill be hard to implement in Indonesia and China where most of
\nAPP's assets are.<\/p>\n
Instead, APP should continue to operate under its present
\nmanagement, aided by the Indonesian Bank Restructuring Agency,
\nwhich is one of its top Indonesian creditors, to quickly
\nrestructure the group.<\/p>\n
APP is one of the world's biggest pulp and paper producers and
\nAsia's largest debtor owing creditors some $13.9 billion.<\/p>\n
In June, Deutsche Bank AG and BNP Paribas initiated legal
\naction to recover $193 million and $20 million that APP owes
\nthem, respectively. The legal action pits Singapore's legal
\nsystem against one of the world's most complex companies.<\/p>\n
The two European banks say they are being backed by several
\nother creditors, including Credit Lyonnais SA, Citigroup Inc., GE
\nCapital, a unit of General Electric Co., and Oaktree Capital.<\/p>\n
Together, the companies are owed $3.6 billion - an amount that
\nAPP counsel Davinder Singh disputed on Wednesday at the second
\nhearing since July 11. The hearing continues Thursday.<\/p>\n
The plaintiffs argue a new management is needed because the
\ncurrent one has failed to treat all creditors equally, it has
\ndelayed the restructuring the group and failed to disclose
\ncritical information about its finances.<\/p>\n
But APP argues that surveys by its law firm show only a
\nminority of creditors supporting the plaintiff's legal action.<\/p>\n
A quarter of creditors who are owed by the holding company
\noppose the legal action and only 11 percent support it, Singh
\nclaimed. Support is even weaker among creditors for APP's
\noperating subsidiaries in Indonesia and China, he said. Without
\nthe subsidiaries, APP is essentially a holding company with few
\nassets of its own.<\/p>\n
Those who oppose the appointment of a judicial manager include
\nJapanese lender Nomura, Clariden Bank and UOB Kay Hian, a unit of
\nSingapore's United Overseas Bank Ltd., Singh said.<\/p>\n
Singh also argued that it will be nearly impossible to
\nimplement orders from a court in Singapore as APP's assets are in
\nIndonesia and China where the court's jurisdiction could be
\nchallenged.<\/p>\n
\"You can appoint 50-100 judicial managers ... in reality how
\nare they going to expedite the restructuring process?\" Singh
\nsaid.<\/p>\n
The Singapore-registered APP, which acts as a holding company
\nfor some 150 pulp and paper assets across Indonesia, China and
\nthe U.S., is owned by the Widjaja family and its Sinar Mas group.<\/p>\n
Singh said IBRA, which is owed $1.2 billion, has taken on an
\nactive role to restructure APP.<\/p>\n
\"IBRA is saying to this court ... this is Indonesia, we know
\nIndonesia well, let us do it,\" Singh said, adding that IBRA's
\nappointment of five financial managers at APP is a clear sign of
\nits intent to restructure the company and recover the debt
\nquickly.<\/p>\n
The plea to appoint an independent management is also opposed
\nby Chinese banks - which are owed about $1.14 billion by APP's
\nChina operations - and the labor unions, Singh said.<\/p>",
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"sponsor": "Okusi Associates",
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