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.