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.