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.