APP to continue payments on rupiah

JAKARTA (JP): The heavily indebted Singapore-based Asia & Pulp Paper Cp. (APP) agreed to continue its payments of local bonds, following a deal struck last week between the company and local bondholders, a government official has said.

Head of Indonesian Bank Restructuring Agency (IBRA) Asset Management Investment Thomas Lembong said the government had facilitated the meeting.

"There is a social aspect behind APP's consideration to pay the bondholders," he told The Jakarta Post over the weekend.

He said some of the bonds had been financed from pension funds, which could not be ignored.

But Thomas dismissed the notion that local bondholders had threatened APP to pay its debts.

Media reports earlier cited local bondholders planning to sue APP if the firm refused to make payments on its local bonds.

In March, the company imposed a payment standstill on debts of over US$13 billion to foreign and local creditors.

APP maintained its local bonds payment but later reimposed the debt standstill, citing pressure from foreign creditors.

The decision to revoke the debt standstill on local bondholders almost confirms the foreign creditors' fear that APP favors Indonesian creditors.

"We have been under substantial public pressure in Indonesia to pay our local bondholders and are extremely disappointed that they have, to date, refused to take part in the restructuring," APP finance director Hendri Tee told Dow Jones.

"The ongoing stability of APP and its operations are an integral part of the restructuring process," Tee said. "With this in mind, we consider the decision to pay local bondholders to be in the long-term interests of all parties."

APP is due to pay Rp 42 billion (about $3.78 million) to bondholders of PT Lontar Papyrus Pulp & Paper Industry on July 26.

On Aug. 8, the firm is due to pay Rp 9 billion to bondholders of PT Pabrik Kertas Tjiwi Kimia. (bkm)