APP move closer to restructuring

APP move closer to restructuring

Dow Jones Jakarta

Asia Pulp & Paper (APP) moves closer to restructuring its US$13.9 billion borrowing Saturday through an outline agreement with a group of creditors, but the deal fell short of a full debt workout.

The Indonesian Bank Restructuring Agency (IBRA), which is leading the debt workout, said it and creditors representing export agencies had agreed with APP on a plan to restructure $7 billion.

The outline agreement covers the debt owed by APP's four Indonesian operating companies. APP is based in Singapore but has paper operations in Indonesia and China.

"We hope to have a definitive restructuring agreement by the end of this year," Mohamad Syahrial, a deputy chairman at IBRA, told Dow Jones Newswires.

Still, APP's debt workout, among the largest in emerging markets faces a number of hurdles not cleared up by Saturday's agreement.

Not all of the company's hundreds of creditors were present at the weekend meeting on the Indonesian island of Bali. The meeting didn't discuss debt held by APP's non-Indonesian units.

APP's creditor steering committee fell apart earlier this year amid squabbling. Some creditors, led by Deutsche Bank AG are still trying to take control of APP's management.

Under Saturday's outline agreement APP's current management will continue to run the company during restructuring.

Of the $7 billion, creditors and APP agreed that $1.2 billion is sustainable. Of the remainder, $3 billion will be rescheduled and similar amounts swapped for U.S. convertible bonds issued by the Indonesian operating company.

Last week, APP agreed to pay $100 million into an escrow account by the end of this month, and $20 million every month subsequently. IBRA, which is owed $1 billion by APP said the payment was a prerequisite to reaching a debt restructuring agreement. APP called a debt standstill in March 2001 after years of overborrowing.