APP hopes to reach full debt restructuring agreement soon

APP hopes to reach full debt restructuring agreement soon

The Jakarta Post, Jakarta

Asia Pulp & Paper Co. (APP) hopes that its recent proposal to
the U.S. market authority will help settle differences with
foreign creditors, a condition that should help reach a full debt
restructuring agreement for the US$6.7 billion debt owed by its
Indonesian units in August.

APP spokesman Yan Partawijaya said that a restructuring
proposal filed with the U.S. Securities and Exchange Commission
(SEC) last week was expected to help creditors fully agree to key
points in the company's master restructuring agreement (MRA).

"The filing with the SEC is aimed at bridging differences with
our dollar-denominated bondholders, which accounts for around 50
percent of the company's debt owed by the Indonesian units," said
Yan after attending a seminar late last week.

Yan said that thus far 44 percent of the company's creditors
had agreed with the MRA.

In order for the MRA to be effective, the company needs to
secure the support of 90 percent of its creditors.

Singapore-based APP, which was founded by tycoon Eka Tjipta
Widjaja, stopped repaying its total US$13.9 billion debt
(considered to be one of the largest emerging market debts) in
March 2001, nearly half of which is owed by its Indonesian units.
Talks with creditors dragged on, with little progress for more
than three years.

The company, which also has an operation in China, is indebted
to hundreds of foreign creditors, ranging from export credit
agencies, to pension funds and individual bondholders.

In its filing with the SEC, APP proposes to issue new bonds to
the bondholders to replace the defaulted bonds. The new bonds are
expected to carry yields of around 3 percent, lower than the
older bonds of around 10 percent.

However, the replacement bonds will have a longer maturity
period of up to 10 years, from the previous bonds, which carry a
period of five years.

The SEC is expected to come up with the bondholders' opinion
on Aug. 15.

Yan explained that APP had to go through the SEC because its
dollar-denominated bonds owned by the creditors were listed in
the United States.

"This is also part of U.S. regulations that we have to undergo
in order to settle the problems," said Yan, who is a former
senior anchor for state television station TVRI.

Yan said that APP would try to extend its offering to the
bondholders via the SEC if its attempt to replace the bonds
received a thumbs-down from the bondholders.

"I hope the bondholders can agree with the filing. This is the
best solution that we have come up with. It is better for them to
agree with it, rather than fail to receive any payment," he said.

APP Indonesian units comprise of PT Indah Kiat Pulp & Paper
Mills, PT Pabrik Kertas Tjiwi Kimia, PT Pindo Deli Pulp & Paper
Mills, PT Lontar Papyrus Pulp & Paper Industry, and PT Eka Mas
Fortuna.