Tue, 07 Dec 2004

APP settles part of massive debt restructuring

Rendi A. Witular, The Jakarta Post/Jakarta

Singapore-based Asia Pulp & Paper Co. (APP) announced on Monday that it had obtained approvals from its creditors for the restructuring of most of the debts owed by the group's Indonesian units, with repayments to start early next year.

With this latest development, the company hopes to end the uncertainty surrounding the restructuring of some US$6.7 billion in debts.

The company has received the consent of 93 percent of its private and public creditors for the restructuring of some $4.7 billion of the debts, according to Gandhi Sulistiyanto, deputy chairman of the APP debt restructuring team.

"Most of our creditors have agreed to the Master Restructuring Agreement (MRA) we have offered. The agreement will become effective by no later than Jan. 31," said Gandhi.

The creditors that approved the deal include Goldman Sachs, JPMorgan Chase Bank, Deutsche Bank AG, UBS AG, Franklin Templeton Group, European export credit agencies, and the Japanese Export Credit Agency.

Gandhi said the restructured debts covered only those owed by three of APP's four indebted Indonesian units: PT Indah Kiat Pulp & Paper, PT Tjiwi Kimia, and PT Pindodeli Pulp & Paper.

Meanwhile, the remaining $2 billion has not yet been restructured, due partly to legal dispute involving PT Lontar Papyrus Pulp & Paper Industries and its creditors Oaktree Capital and Gramercy Advisers.

Oaktree and Gramercy are still refusing to sign the agreement, and are currently seeking to recover their loans through legal action in the United States, Indonesia and Singapore, something that could still derail the APP debt restructuring plan.

The two creditors have said that APP's debt restructuring scheme was not favorable to them as APP would not have to repay some of its debts for more than two decades.

Indeed, under the MRA, APP's Indonesian units will repay the greater part of their debts within 13 years, while the remainder will be repaid in 18 to 22 years. Gandhi could not provide the details.

However, Gandhi said that the legal dispute with Oaktree and Gramercy would not disrupt the APP debt workout scheme as these creditors and the debt restructuring of Lontar Papyrus' debt were not included in the MRA.

"I do not think that the legal dispute with the other creditors will affect the debt restructuring efforts as they are not related to the MRA," said Gandhi, adding that APP would continue to resolve its problems with creditors.

APP, which was founded by Indonesian tycoon Eka Tjipta Widjaja, stopped repaying a total of US$13.9 billion in debt in 2001. Nearly half of the debts are owed by its Indonesian units and the remainder by its Chinese units. This is the largest emerging market debt in history.

Talks with creditors dragged on, with little progress for more than three years.

Gandhi said the company would make a principal and interest payment for the first time since 2001 after it finalized the administration aspects of the MRA.

APP financial advisor Nicky Tan said the MRA was expected to serve as a restructuring model for APP's remaining $7.2 billion in debts owed by its Chinese units.

"We expect the entire debt restructuring process to be settled in the first half of next year," said Tan.

Elsewhere, Bloomberg reported on Monday that Standard & Poor's withdrew its 'D' rating on APP debts due to the lack of adequate information on its financial results, operating performance and progress on its debt restructuring.