Asia Pulp & Paper to meet with creditors for talks

Asia Pulp & Paper to meet with creditors for talks

SINGAPORE (Reuters): Asia Pulp & Paper, which called for a
moratorium on its US$12 billion in debt last month, is finally
meeting its creditors face-to-face on Monday but bond holders
doubt a concrete rescheduling plan will emerge.

"There will be some summary numbers and they will probably map
out a broad timetable," said a bond fund manager in Hong Kong who
holds APP debt at the holding and operating company level.

"There will be some financials discussed at that meeting but
it's not going to be all that detailed."

The troubled Singapore-based and New York-listed group, run by
the Widjaja family which owns Indonesia's Sinar Mas conglomerate,
has frozen its interest and principal repayments to preserve its
precious cash.

"I don't expect any proposal yet," said Handoko Kartawidjaja,
an analyst at SG Securities in Jakarta. "Usually at this early
stage, they will first do the administration on who owns what."

Kartawidjaja said he did see a solid proposal being presented
for six to nine months.

Sources close to APP's debt restructuring team confirmed the
group had no concrete plan ready for the meeting in Singapore but
was following the advice of financial adviser Credit Suisse First
Boston to face its creditors and give them the latest update.

CSFB, which is also the adviser to other Indonesian giants
like PT Indocement Tunggal Prakarsa, PT Bimantara Citra and PT
Gajah Tunggal, is represented by Eric Varvel and Raymond Davis in
the APP restructuring.

The sources said the Indonesian junk bond king -- much of
APP's debt is rated D by various agencies -- may not seek a
discount or "haircut" from its creditors on Monday, setting it up
for a long and painful rescheduling process.

In other debt restructuring cases where the amounts were
substantially smaller, companies needed at least one year to come
to a final approval from creditors, analysts said.

"That's because those companies have gained credibility and
confidence from creditors. APP still needs to establish that,"
one Jakarta-based analyst said.

The $12 billion -- equal to about 40 percent of Indonesia's
gross foreign exchange reserves -- makes APP's corporate debt
restructuring one of the largest in an emerging market.

Assets of the holding company are centered on Indonesia's PT
Indah Kiat Pulp & Paper, PT Pabrik Kertas Tjiwi Kimia and
unlisted PT Pindo Deli Pulp & Paper.

Despite the debt woes, the Jakarta analyst said the Widjaja
family still wanted to keep a firm hand on the 10th largest paper
concern in the world by capacity of paper and board in tons.

"The Widjajas still want to retain control over the firm they
have built up from scratch. Its creditors may have to negotiate
what is left for the family after restructuring," he said.

But the analyst said APP debt was "so mind-boggling" that
nobody would understand it except for the family.

"After looking at the debt, it looks more like a finance
company than a paper maker," he added.

Creditors likely can expect more crevasses in APP's debt
mountain after this week's disclosure it failed to factor a $220
million loss on two currency swap contracts into its financial
statements.

"The $220 million is not surprising and you can expect to hear
about more," the bond fund manager said, adding that the amount
could blow out through derivatives or offshore guarantees.