IBRA expects APP restructuring deal in July
IBRA expects APP restructuring deal in July
The Jakarta Post, Jakarta
The Indonesian Bank Restructuring Agency (IBRA) expected Asia
Pulp and Paper (APP) to reach a final debt restructuring
agreement with its creditors in early July.
IBRA Chairman Syafruddin Temenggung was quoted on Monday by
detik.com as saying that a week-end agreement over a default
mechanism should open the way for a final solution to settle the
huge US$6.3 billion debt owed by APP's Indonesian units.
In a marathon meeting between APP and its creditors, including
IBRA and foreign creditors grouped under the Export Credit Agency
(ECA), the two sides agreed on a mechanism to protect creditors
if the company goes into a second default.
Under the new agreement, APP can be declared in default if 75
percent of creditors agree. If the creditors fail to obtain the
75 percent support for default, they can take a second vote with
a 67 percent requirement, a third vote with a 51 percent
requirement, and fourth vote with a threshold of only 25 percent.
These stages must be completed within 180 days.
Initially, APP demanded a 75 percent threshold. But the
creditors, especially those grouped under ECA, which represents
creditors from 11 countries, rejected the demand saying that the
APP proposal was not feasible given the fact that the company's
creditors -- which comprise hundreds of banks, bondholders,
export credit agencies and others -- are spread across the world.
The ECA proposed a 25 percent requirement to declare a
default.
Two years ago, the Singapore-based APP defaulted on $13.9
billion in debts, one of the largest defaults in the history of
emerging markets. The debt includes money owed by APP's China
units.
The Indonesian APP units are PT Indah Kiat Pulp & Paper, PT
Tjiwi Kimia, PT Pindodeli Pulp & Paper and PT Lontar Papirus Pulp
& Paper Industries.
Other areas of agreement during the week-end meeting were in
less contentious issues such as the terms for converting debt to
equity, and the creation of a creditors' committee to review
related-party transactions.
Syafruddin said that the "policy makers" of each APP creditor
have yet to give their final approval on the results of the week-
end meeting.
He added that IBRA must also first seek approval from the
Financial Sector Policy Committee, a grouping of senior economic
ministers, which has the final say on the agency's major deals.
IBRA is APP's single largest creditor with total debts of $1
billion. The agency took over the debts from troubled local banks
in the wake of the late 1990s financial crisis.