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.