APP seeks support for restructuring plan

APP seeks support for restructuring plan

Dadan Wijaksana, The Jakarta Post, Jakarta

Asia Pulp & Paper Co. (APP), the world's leading pulp and
paper producer, said on Monday it would not be able to obtain
enough support from creditors for a debt work-out scheme by the
March 31 deadline.

The company is now seeking creditors' consent to extend the
deadline to May 30, according to G. Sulistyo, deputy chairman of
the APP's debt restructuring team.

In October last year, APP signed an initial restructuring
agreement for its huge US$6.7 billion debts with a number of
creditors, including the largest one -- the Indonesian Bank
Restructuring Agency (IBRA) -- with around $1 billion owed.

The Master of Restructuring Agreement (MRA) stipulates that
creditors who hold at least 90 percent of the debts have to give
approval to the deal before it becomes effective. The deadline to
obtain this approval is the end of this month.

"By then (May 30), we're optimistic we'll be able to secure
the required approvals," Sulistyo told The Jakarta Post on
Monday.

He claimed that most creditors had in principle showed no
objections to the plan.

"But the problem is, it requires a lot of legal and
administrative work, which is not only difficult, but also time
consuming," he said, adding that the creditors who had yet to
give their approval to the deal were mostly U.S.-based.

He did not elaborate on what the consequences would be if the
extended deadline was not met.

The debt workout plan was initially signed by only 40 percent
of the creditors.

Three years ago, the Singapore-based APP defaulted on its
$13.9 billion of debts, and restructuring talks have been
underway ever since.

The MRA's signing was part of those restructuring efforts, but
only covers debts owed by APP's four Indonesian units: PT Indah
Kiat Pulp & Paper, PT Tjiwi Kimia, PT Pindodeli Pulp & Paper and
PT Lontar Papyrus Pulp & Paper Industries.

Despite the signing, however, it is doubtful that APP can
obtain enough support from creditors as many have previously
objected to the deal -- which they claim is in favor of the
company's founder, the Widjaja family, rather than the creditors.

Critics point out, for instance, that the Widjaja family will
continue to run the daily operations of the four firms, while the
payment of the first tranche of the debts -- amounting to $1.2
billion -- would only be payable after 10 years.