APRIL gets relief to expand Riaupulp
APRIL gets relief to expand Riaupulp
JAKARTA (Dow Jones): Singapore-based pulp and paper concern Asia Pacific Resources International Holdings Ltd., or APRIL, said Friday the relief it will get from a US$800 million debt restructuring plan will help it expand its pulp production in Riau, Indonesia.
Creditors representing 75 percent of the company's debt have approved the restructuring, and remaining creditors are expected to complete credit approval by the end of October, the company said.
In an interview with Dow Jones Newswires, APRIL Chief Financial Officer Mark Blackburn said the maturity of the short- and long-term debt would be rolled over to 2005 and be repaid in full.
"We have the most successful restructuring out of Indonesia so far with full repayment of the principal and all interest," Blackburn said.
Blackburn was speaking after the company said a planned alliance with Finnish forestry group UPM-Kymmene Oy has fallen apart, in part because UPM didn't want exposure to Indonesian political risk, Blackburn said.
The two companies are joint venture partners in a paper mill and stationery plant near Shanghai as Asia Pacific Forest Products (Suzhou) Pte. Ltd.
Under the APRIL's debt restructuring plan, interest on the principal amount would be waived for 18 months while APRIL completes the first phase of expansion of its pulp plant in Riau in Sumatra.
The plant is operated by PT Riau Andalan Pulp & Paper, known as Riaupulp, which is 99 percent-owned by APRIL.
APRIL said its majority creditors had agreed to help fund the $520 million plant expansion because it will increase its capacity to 1.3 million tons of bleached hardwood kraft pulp annually and generate cash to pay back the debt.
The additional operation is expected to come on-line by the end of 2000, Blackburn said.
"This will increase our cash flow substantially and help us to repay our creditors faster," he said.
Capacity of APRIL's current pulp line has been increased to 850,000 tons after a debottlenecking program that was delayed by the debt makeover.
The plant is expected to produce 730,000 tons of BHK pulp in 1999, slightly lower than originally forecast.
APRIL has already spent $174 million on the first phase of the new pulp line. The remaining $350 million will come from existing creditors, surplus cash flow from the existing pulp line and $100 million from majority shareholder the RGM Group.
Obtaining financing for the completion of the line has proved difficult because of Indonesia's economic crisis and the company's debt overhang, Blackburn said.
"We're up and running (with the new line) later than we would have liked," he said.
Buoyed by progress on debt restructuring and returns from a strong international pulp market, APRIL has appointed a financial adviser to recommend funding options for further expansion of Riaupulp and a second machine at its adjacent paper mill.
The paper mill has output of 350,000 tons a year of uncoated, wood-free paper and is operated by Riau Andalan Kertas, which APRIL owns through its APRIL Fine Paper unit.
"We're looking for funding for the second phase (of Riaupulp expansion)," Blackburn said.
Pulp prices have risen substantially in 1999, adding momentum to APRIL's efforts to reach agreement with creditors and channel profits into its plant expansion.
The company said BHK pulp prices are averaging more than $520 per ton in 1999, up from $373 per ton in 1998.