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