APP gets fresh S'pore reprieve, but faces new suit
APP gets fresh S'pore reprieve, but faces new suit
SINGAPORE (Reuters): Debt-ridden Asia Pulp & Paper (APP) got another reprieve on Friday from Singapore's High Court, warding off a line of creditors, but also faced a fresh lawsuit that could signal still more to come.
The High Court ordered a stay of all further proceedings in the case of Bank of East Asia against APP unit Paper Box Industries (S) Pte Ltd.
This was the second reprieve for APP after the same court froze a winding-up proceeding filed against the company by Sweden's CellMark AB early this month for $10.81 million owed.
APP fought vigorously for a stay in the CellMark case, saying that "should the company go into liquidation or news of the petition was to hit the market, it will have dire consequences for the world markets and particularly the Indonesian economy."
APP, controlled by Indonesia's second largest conglomerate the Sinar Mas group owned by the Widjaja family, is in the process of restructuring its $12.2 billion debt.
It is the world's fourth biggest paper maker by capacity, but has stopped payment of interest and principal on its debt in order to preserve remaining cash.
The S$0.59 million owed to the Hong Kong bank involved in Friday's decision for a stay was tiny compared with the total APP debt.
But if a judgment was made, it would have opened the way for Overseas Union Bank, also a creditor of Paper Box, to appoint a receiver to seize its assets, industry sources said.
OUB has indicated that if Bank of East Asia gets a judgment, OUB would appoint a receiver and manager over the assets of Paper Box pursuant to the terms of its debenture, they said.
"OUB has the first right to all the assets under the terms of the debenture," one source said.
APP, with the help of its adviser, Credit Suisse First Boston, had argued that there was very little potential value for APP creditors, apart from what might derive from the reorganization of the APP Group's operating subsidiaries.
"The court has put its decision on hold to see how the proposed restructuring proceeds," the source said.
In a separate case of AHC Enterprises Pte Ltd against APP over S$1.17 million owed, the High Court ruled on Friday in favor of AHC.
A lawyer representing AHC confirmed that ruling. But it was not clear how AHC would proceed if APP declined to pay.
Meanwhile, another APP supplier, Magnesium Elektron Ltd, filed a lawsuit against the Singapore-based and New York listed APP for $1.55 million for contracts related credit facilities, overdraft and guarantees.
The amount was also insignificant, but the action may indicate more and more creditors were trying to get hold of APP's assets as the outcome of its restructuring effort was unclear.
In an unexpected turn on Thursday, APP subsidiary, PT Indah Kiat Pulp & Paper, told disgruntled bondholders in Jakarta that it would make interest payment on a one trillion rupiah bond issue ($88.5 million) on Friday.
Another subsidiary, PT Lontar Papyrus Pulp & Paper Industry, also agreed to pay interest by May 23 on a one trillion rupiah issue after bondholders threatened legal action.
Foreign bondholders, who hold much of the APP debt, had feared they would get sidelined in a rush for assets and cash as APP undergoes a separate restructuring that may take years.
APP said in a statement late on Thursday that problems faced by its operating units in the past few months had resulted in delays in preparation of financial statements.
"We are not in a position to release our financial statements for the fourth quarter of 2000 or the first quarter of 2001," said Hendrik Tee, APP's chief financial officer.