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.