Creditors reject APP debtextension plan

Creditors reject APP debtextension plan

Soraya Permatasari, Reuters, Jakarta

Creditors on Friday rejected a proposal by Asia Pulp & Paper (APP) to restructure its massive U$12.2 billion debt only hours after the embattled group presented the long-awaited plan in Jakarta.

One banker on the creditors' steering committee said a number of concerns had been raised, including APP's proposal to seek debt extensions of up to 13 years. The group had also not provided enough financial information, added the banker.

"They have officially rejected the plan," the banker, who declined to be identified, told reporters on the sidelines of the meeting of APP and its creditors in the Indonesian capital.

"The principles of restructuring that were submitted today were not in accordance with those which we talked about before."

Financial experts had earlier expressed skepticism the proposal would please APP's complex mix of foreign and local creditors or offer a quick solution given the size of the debts at one of the biggest corporate defaulters in emerging markets.

Singapore-headquartered APP is the largest pulp and paper group in Asia outside Japan and has its main operations in Indonesia and China. It is owned by the Sinar Mas Group, Indonesia's second largest conglomerate.

The implications of the rejection were not immediately clear. The banker did not say when APP and creditors would meet again. He added there was no commitment from APP shareholders to ensure cash flow to the group's cash-strapped units.

Debt-to-equity swaps had also not been discussed, he added.

Regarding financial information, the banker said not enough had been given to international accounting firm KPMG, which is the adviser to the creditors' steering committee.

Earlier, one participant at the closed-door meeting told reporters the plan called for debt extensions of one to 10 years depending on the type of loan outstanding. He declined to give his name or say who he represented.

One APP executive said the proposal was divided into three sections, covering the holding company itself, the units in Indonesia and those in China.

Some 60 members of the creditors' steering committee and their advisers attended the meeting.

Further complicating the brew is some $1.3 billion in debt Sinar Mas owes to a bank under the control of the state-run Indonesian Bank Restructuring Agency (IBRA). APP accounts for about $1 billion of the debt.

That has raised fears among APP's many foreign creditors, especially bondholders, that IBRA could sideline them in any debt restructuring proposal because many of APP's prime assets are located in Indonesia.

The agency attended the meeting on Friday to make sure the draft plan would be in line with a previous deal made with Sinar Mas over the $1.3 billion debt.