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.