APP says reaches compromise with creditors
APP says reaches compromise with creditors
Dow Jones Jakarta
Asia Pulp & Paper Co. said on Friday it has managed to iron out its differences with creditors, and hopes by the end of October to reach a full debt restructuring agreement for US$6.7 billion owed by its Indonesian units.
The settlement of APP's Indonesian debt is a crucial first step to resolving one of the largest corporate restructurings in emerging-market history.
The Singapore-based APP, which has operations in Indonesia and China, stopped repaying its total US$13.9 billion debt in March 2001. Talks with creditors dragged on, with little progress for two years, before APP agreed in June to an outline restructuring plan for its Indonesian company debt.
APP's owners, the Widjaja family, have since then been demanding changes to the June deal, threatening to sink chances of reaching an out-of-court settlement, creditors said.
Representatives of foreign export-credit agencies from Japan, Germany, Austria and Sweden, which are among APP's leading foreign creditors, flew to Jakarta this week to try and forge a compromise with the Widjajas.
The agencies and the Indonesian Bank Restructuring Agency, which is APP's largest single creditor, agreed to some of the Widjaja's proposed changes after two days of talks that ended late Thursday, said Gandhi Sulistiyanto, a negotiator for the company.
These include a revision to the June agreement extending the time by which APP must repay $2 billion in unsustainable - or Tranche C - debt to a maximum 22 years from 15 years as originally agreed. The Widjajas had been asking to remove any deadline for repaying this tranche of debt, according to people familiar with the talks.
Creditors and APP agreed to sign a definitive debt agreement on Oct. 24, he added. After that APP's hundreds of other creditors, who range from individual bondholders to pension funds, will be asked to vote on the plan.
Still, APP's failure to keep to agreements in the past means creditors aren't confident of quickly tying up the discussions, said people close to the talks. Representatives for the export- credit agencies declined to comment.
The export-credit agencies might also have trouble getting other creditors to agree to the deal. Many creditors have already criticized the June deal for being too lenient on APP by forcing it to repay only $1.2 billion of sustainable - or Tranche A - debt over 10 years, while allowing the rest to be refinanced or exchanged for convertible bonds.
Other creditors have been unwilling to negotiate with the Widjajas and have tried to wrest control of the company from the family.
Deutsche Bank AG, owed $193 million by APP, and France's BNP Paribas SA last year petitioned a court in Singapore to strip the family of control and appoint an administrator to manage the company. The court rejected the banks' petition, but said if consensual debt restructuring remained stalled, the appointment of judicial managers couldn't be ruled out in the future.