APP plans legal action against creditors

APP plans legal action against creditors

Dow Jones, Jakarta

Asia Pulp & Paper Co. said Thursday it will fight a recent petition at the Singapore High Court by two of its creditors to put the company under judicial management while it restructures US$13.4 billion in debt.

Deutsche Bank AG, a member of APP's creditor steering committee, and BNP Paribas filed the petition earlier this week to ask the court to appoint an independent manager for the ailing pulp and paper company. In the petition, the banks said creditors were concerned APP's current management was stalling the restructuring process.

"APP intends fully and vigorously to resist the petition," the Singapore-headquartered company said in a statement. "APP plans to respond swiftly and comprehensively to the petition and has instructed its legal adviser accordingly."

APP, which is a holding company for Indonesia's Sinar Mas Group, called a debt standstill in March last year after years of heavy borrowing. The point of the standstill was to give the company breathing space so it could recover and start paying its suppliers again.

The company began restructuring talks soon afterwards with hundreds of creditors which include banks, credit export agencies and private bondholders.

Creditors rejected in February an initial debt restructuring plan drawn up by APP with its financial advisers Credit Suisse First Boston.

APP countered Deutsche Bank's claims that the current management was delaying the restructuring, saying this failed to take into account the "sheer size of the creditor group."

"Further, there are complex inter-creditor tensions and conflicts which have the unfortunate, though real, effect of complicating and lengthening the restructuring discussions," APP's statement said.

Deutsche Bank's appeal to the court to remove the management underscores the tensions in APP's debt restructuring. People close to the talks said they were surprised the bank had taken a unilateral action while it remained a member of the creditor steering committee.

Attempts to draw up another debt workout plan have stalled amid a row over payment with accounting firm KPMG, which carried out a review of APP's businesses for the creditors, said a person close to the talks.

Since APP, which has pulp and paper businesses in Indonesia and China, stopped paying suppliers last year, more than 10 lawsuits seeking repayment have been filed in Singapore.