APP halts bond payments due to foreign pressure<\/p>\n
JAKARTA (JP): The four Indonesian units of the heavily
\nindebted company, Asia Pulp & Paper (APP), are seeking to
\nreimpose a debt standstill over principle and interest payments
\nto rupiah bondholders, citing pressure from foreign creditors.<\/p>\n
Chief executive officer of APP's publicly listed subsidiary PT
\nPabrik Kertas Tjiwi Kimia, Gunawan Taslim, said that APP was
\nseeking to negotiate a suspension of payments to local
\nbondholders.<\/p>\n
He said APP was feeling the brunt of foreign creditors who
\nquestioned the company's payments to local bondholders despite a
\npayment standstill on all its debts since March.<\/p>\n
We don't abide to the principle of our debt moratorium if we
\nhave to make preferences over which creditors we pay," he told
\nreporters after a public expose on APP's two publicly listed pulp
\nand paper companies, Tjiwi Kimia, and PT Indah Kiat Pulp & Paper.<\/p>\n
APP's two other subsidiaries are pulp and tissue producer PT
\nLontar Papyrus and packaging firm PT Pindo Deli.<\/p>\n
Gunawan fell short of saying how much APP owes to local
\nbondholders, but he said the company would skip interest payments
\nof Rp 42.5 billion (about US$3.7 million) due on July 14.<\/p>\n
The New York-listed and Indonesian controlled APP is facing
\nheavy pressure to settle its $13 billion debts to local and
\nforeign creditors.<\/p>\n
In March, the company announced a suspension on all debt
\npayments reasoning it needed time to stabilize operations of its
\nIndonesian and Chinese units.<\/p>\n
The company blamed low pulp and paper prices coupled with
\nfinancial constraints for plaguing their operations.<\/p>\n
Yet despite the debt moratorium, APP maintained interest
\npayments to local bondholders.<\/p>\n
Sharp criticism followed from foreign creditors demanding that
\nall creditors should receive equal treatment. They fear the
\nIndonesian government, which is one of APP's largest creditors,
\nwill be given priority under any debt restructuring deal.<\/p>\n
APP is controlled by Indonesia's Sinar Mas Group, which owes
\ndebts of some Rp 13 trillion to the Indonesian Bank Restructuring
\nAgency (IBRA).<\/p>\n
IBRA took over the loans from Bank Internasional Indonesia
\n(BII), which is also partly owned by the Sinar Mas Group.<\/p>\n
Following the debt standstill, APP said it would prioritize
\nany debt repayments to its suppliers and trade creditors to
\nenable its units remain in operation.<\/p>\n
It argued that stabilizing its Indonesian units' operations
\nwas vital for the faster servicing of its debts.<\/p>\n
Gunawan said that after three months of the debt moratorium,
\nAPP's Indonesian units showed an improvement in their operations.<\/p>\n
Before, he said, production fell by an average of 20 percent
\nas its lack of liquidity led to a shortfall in raw materials.<\/p>\n
"We had to use the money to pay debts," he said.<\/p>\n
Consequently, he said, APP was unable to purchase the amount
\nof raw material needed to keep production at normal levels.<\/p>\n
To date, production is seen improving close to its normal
\nlevels, though not enough to call them stable, he said.<\/p>\n
APP said in a statement on Wednesday that since April
\nliquidity of its units' operations had improved.<\/p>\n
"Our liquidity situation has improved somewhat in April as a
\nresult of our efforts in the first quarter to focus on cash sales
\nrather than sales on payment terms. This led to improved
\nproduction levels in April and May," said APP's chief financial
\nofficer Hendrik Tee in a statement.<\/p>\n
Though production is improving, sales have deteriorated.<\/p>\n
The company's data shows that the average sales price of APP's
\nproducts in May and April were lower compared to the average
\nsales price during the first three months of the year. It gave no
\nexplanation on the lower price figures.<\/p>\n
APP is one of the world's largest pulp and paper groups,
\nowning 17 manufacturing facilities in Indonesia, China and India,
\nwith markets in over 65 countries.<\/p>\n
The company plans to dispose some of its assets to raise funds
\nfor servicing its debts.<\/p>\n
But Gunawan said none of these assets would be in equity from
\nAPP's Indonesian units.<\/p>\n
As yet, he continued, the company was waiting for the
\nappraisal of these assets before determining which to sell.<\/p>\n
According to him, APP has been earmarked to sell machines for
\nthe production of tissue owned by Pindo Deli.(bkm)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/app-halts-bond-payments-due-to-foreign-pressure-1447893297",
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