APP to contest bid to seize pulp mills

APP to contest bid to seize pulp mills

Agence France-Presse, Jakarta

Debt-ridden Asia Pulp and Paper said on Thursday it would fight a legal action launched in Indonesia by two U.S. companies who reject a restructuring deal signed with other creditors.

The Singapore-based wood and pulp conglomerate defaulted in 2001 on debts totaling US$13.9 billion, the biggest corporate default in the history of emerging markets.

It is facing several lawsuits from creditors who reject an initial restructuring deal.

U.S. fund managers Gramercy Advisors and Oaktree Capital Management last month applied to a district court in Riau province on Sumatra island to foreclose on the paper-making plants of APP's listed Indonesian subsidiary, Indah Kiat Pulp and Paper.

The plants were collateral for a debt of some $486 million.

"We will vigorously defend this litigation, as we have in the past defended all legal actions which are inconsistent with the consensual restructuring," said Teguh Ganda Wijaya, APP's chief executive officer, in a statement.

He said the so-called Master Restructuring Agreement is the only way to protect the interests of all.

On October 30, APP signed a deal with several key creditors to restructure $6.4 billion of its debt -- the portion owed by its four Indonesian units. The agreement still needs the support of 90 percent of creditors to become final.

The firm is controlled by members of Indonesia's Widjaya family.

Gramercy and Oaktree are among creditors who hold 60 percent of the debt of APP's Indonesian units and who have yet to sign the deal.

The U.S. firms say they hold a combined $75 million in bond principal issued by Indah Kiat. They have rejected the restructuring deal because it does not give preferential treatment to secured creditors.

The district court at Bengkalis has set Thursday as the deadline for Indah Kiat to appear before it to settle its obligations. Failure to respond could lead to an application for seizure of the two pulp mills.