APP signs debt restructuring deal
APP signs debt restructuring deal
Dadan Wijaksana, The Jakarta Post, Jakarta
Asia Pulp & Paper Co. (APP) signed on Thursday a long-sought deal
to restructure US$6.7 billion in debts owed by its four
Indonesian units.
The company signed the restructuring agreement with the
Indonesian Bank Restructuring Agency (IBRA), and creditors led by
nine foreign government export-credit agencies.
IBRA is APP's largest single creditor with some $1 billion
owed.
IBRA chairman Syafruddin Temenggung said that creditors who
signed the debt work-out plan, one of the largest in emerging
markets, represented some 40 percent of the total debts owed by
the four APP companies.
The companies in question are PT Indah Kiat Pulp & Paper, PT
Tjiwi Kimia, PT Pindodeli Pulp & Paper and PT Lontar Papyrus Pulp
& Paper Industries.
Syafruddin said the agency expected other creditors would give
support to the deal before March 31. According to the deal,
lenders holding no less than 90 percent of the debts ought to
give approval before the deal -- called the Master Restructuring
Agreement (MRA) -- becomes effective.
Two years ago, the Singapore-based pulp and paper giant
defaulted on debts totaling $13.9 billion, and restructuring
talks have been going on ever since. Thursday's signing only
covered debt owed by APP's four local firms. APP also has
operations in China.
The agreement should form a landmark achievement, as it has
taken years of lengthy negotiations filled with rows, spats and
wranglings between involving parties.
However, obtaining approval from the remaining creditors would
not be such an easy task after all. Many creditors have
repeatedly expressed objection to the deal, which they said as
not only carrying lenient terms of conditions, but it also does
little to punish the Widjaja family, the company's founding
shareholder.
Under the agreement, while the Widjaja's will continue to run
daily operations of the companies, the payment of the first
tranche of the debts, amounting to $1.2 billion, would only be
payable after 10 years.
Some creditors have reportedly gone to seek legal settlement
by filing lawsuits to courts in a number of countries.
Dow Jones reported that the U.S. Exim Bank launched a lawsuit
on Wednesday in a New York court in a bid to recover $104 million
in debt owed by APP.
"Unfortunately, we believe that the final debt restructuring
proposal is not fair and equitable to APP's creditors, and its
repayment structure doesn't adequately reflect APP's ability to
service its debt," the Exim Bank said in a statement as quoted by
Dow Jones.
Not to mention, separate legal actions by creditors in foreign
courts, including in the U.S. and Singapore, which would further
complicate APP's debt workout.