IBRA, creditors make new APP debt restructuring proposal<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The Indonesian Bank Restructuring Agency (IBRA) and foreign
\ninstitutional creditors of Asia Pulp & Paper Co. Ltd. (APP) have
\nmade a new proposal to end the deadlock in the restructuring of
\nAPP's US$6.7 billion in debts.<\/p>\n
IBRA said it had reached an agreement with Export Credit
\nAgency (ECA), which represents the foreign institutional
\ncreditors, on a mechanism to discourage APP from defaulting again
\non its debts.<\/p>\n
\"APP is now considering the new proposal and will respond to
\nit next week,\" IBRA said in a press release issued on Wednesday.<\/p>\n
The debts are owed by APP's four local pulp and paper units --
\nPT Indah Kiat Pulp & Paper, PT Tjiwi Kimia, PT Pindodeli Pulp &
\nPaper and PT Lontar Papirus Pulp & Paper Industries.<\/p>\n
Two years ago, the Singapore-based APP defaulted on $13.9
\nbillion in debts, one of the world's largest defaults in the
\nhistory of emerging markets. The debts include those owed by
\nAPP's China units.<\/p>\n
The new mechanism was drafted after ECA rejected APP's
\nproposal that a default could only be declared if 75 percent of
\nthe creditors agreed.<\/p>\n
Under the new proposal, if the creditors fail to obtain 75
\npercent support for default, they can take a second vote within
\n30 days with a threshold of only 25 percent.<\/p>\n
ECA argued that the APP proposal was not feasible given the
\nfact that the company's creditors -- which comprise hundreds of
\nbanks, bondholders, export credit agencies and others -- are
\nspread across the world.<\/p>\n
The new proposal highlights the latest standoff between APP
\nand its creditors in the high profile debt restructuring talks.<\/p>\n
In December last year, IBRA and APP drafted the outline for a
\ndebt rescheduling deal, under which the four APP units would have
\nrepaid $1.2 billion of the $6.7 billion they owed over the next
\n10 years, with the remainder of the debt to be refinanced or
\nexchanged for convertible bonds.<\/p>\n
But the creditors rejected the plan, saying it encouraged APP
\nto default again on its debts since no penalties were in place in
\nthe event of a default.<\/p>\n
APP owes ECA, which includes export credit agencies from
\nEurope, the U.S. and Japan, some $960 million collectively.<\/p>\n
IBRA is APP's single largest creditor with total debts of $1
\nbillion. The agency took over the debts from troubled local banks
\nin the wake of the late 1990s financial crisis.<\/p>\n
The difficulties faced by the foreign creditors in reaching a
\nrestructuring deal prompted some of them to lobby top government
\nofficials to persuade President Megawati Soekarnoputri to
\nintervene in the restructuring process.<\/p>\n
Dow Jones quoted diplomats as saying that German Chancellor
\nGerhard Schroeder -- who met with Megawati on Wednesday -- raised
\nthe issue in their discussions, although no details were
\navailable.<\/p>\n
But it did say that creditors wanted to make sure APP faced
\npenalties if it failed to keep to the terms of a restructuring
\ndeal. Fears are that the country's weak laws could mean that
\ncreditors will not be able to declare the company bankrupt.<\/p>\n
Dow Jones also reported that the company had so far paid $220
\nmillion into an escrow account.<\/p>\n
The account, collected from the units' operational cash flows,
\nwas established at the request of creditors to ensure repayment
\nto creditors once a debt deal was worked out.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ibra-creditors-make-new-app-debt-restructuring-proposal-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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