Foreign creditors call for independent APP management
Foreign creditors call for independent APP management
Dow Jones, Jakarta
Foreign creditors of Asia Pulp & Paper petitioned the Singapore High Court Monday to appoint an independent management over concerns private creditors might lose out to Indonesia's government during restructuring of the company's US$13.4 billion debt.
Deutsche Bank AG and BNP Paribas SA - both creditors of APP - filed a petition with the court in Singapore, where APP is registered, to oust the current management and place the company under judicial management while it restructures its huge debt.
"The intention of the petitioning banks is to facilitate the efficient restructuring of APP's debts and liabilities to allow the company to continue as a going concern by having a court- appointed manager oversee the restructuring process," Deutsche Bank said in a statement.
Deutsche Bank declined to comment further Monday, but it appears likely the petition was motivated by concerns over a looming deadline for the Sinar Mas Group, APP's parent, to repay $250 million from the $1.25 billion it owes the Indonesian government by the end of June.
Sinar Mas has pledged assets - including some of its businesses under Indonesian-listed PT Indah Kiat Pulp & Paper and Pabrik Kertas Tjiwi Kimia - as a guarantee for its debt with the Indonesian government.
Indonesia's Bank Restructuring Agency, or IBRA, has threatened to sell these assets if Sinar Mas fails to pay up on time.
Sinar Mas spokesman Yan Partawijaya told Dow Jones Newswires Monday the group will make payment by the deadline.
But he declined to comment on whether APP will appeal the Deutsche Bank petition in court.
APP successfully appealed a petition from Swedish pulp-trading company, CellMark AB, late last year to wind up the company. CellMark asserted it had been unable to collect $10.8 million owed by APP. The Singapore High Court froze the petition after APP's lawyers argued the company was more valuable as a going concern than as liquidated assets.
Deutsche Bank's petition doesn't attempt to liquidate APP, but to keep the company going under independent management.
The creditors are currently in talks with APP, which is being advised by Credit Suisse First Boston, over restructuring the debt. But the huge number of creditors has made for slow progress, with participants saying it may take years to fully work out the debt. Deutsche Bank is on the steering committee for APP's debt restructuring.
Foreign creditors remain worried that Indonesia's unclear legal system might mean the government - under pressure to reduce its budget deficit - will be able to push for repayment from APP ahead of private creditors that are owed the majority of debt.
APP has riled overseas creditors in the past by giving in to pressure from local investors to continue making payments on rupiah currency bonds after calling a debt standstill on its total loans early last year.
The company borrowed heavily from international debt markets in the 1990s - when Indonesia was the darling of overseas investors - only to see its business collapse over falling paper prices.
Indonesia's government became APP's largest single creditor late last year when the state pumped bonds into PT Bank Internasional Indonesia - Sinar Mas' former banking arm - to save the institution. For years, Sinar Mas used BII to lend without restriction to its own businesses, including APP.
Of the $1.25 billion Sinar Mas owes the government, some $1 billion is owed directly by APP.