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.