IBRA hopes to reach APP debt agreement next week
IBRA hopes to reach APP debt agreement next week Linda Silaen Dow Jones Jakarta
The Indonesian Bank Restructuring Agency (IBRA), said on Friday that it hopes to reach a compromise agreement with foreign creditors next week to restructure US$6.7 billion debt held by Asia Pulp & Paper Co.'s (PAP) four Indonesian companies.
"I'm sure we can sign an agreement on Monday," IBRA Chairman Syafruddin Temenggung told reporters.
Foreign export credit agencies and IBRA have been deeply divided over how to restructure APP's Indonesian debt. Singapore- based APP, which has operations in Indonesia and China, two years ago stopped repaying its $13.9 billion debt owed to hundreds of banks, bondholders, pension funds and other creditors around the world. That has made it one of the largest emerging market debtors.
IBRA - a government agency and APP's largest single creditor with $1 billion held - signed a deal with the company in December under which the four Indonesian units would repay just $1.2 billion of $6.7 billion they owe over a 10-year period.
Almost all foreign creditors rejected the deal, which they said failed to include provisions to ensure APP used all available cash-flow from business operations to repay debt. The proposals also didn't include a mechanism to stop APP defaulting again, foreign creditors said.
Foreign governments whose export credit agencies are owed a combined $960 million - including the U.S., Japan, and a number of European nations - warned that the agreement would force foreign creditors to take millions of dollars in write-offs, and make it difficult for Indonesia to secure financing for future projects.
IBRA handed a compromise deal to creditors this week, which proposes setting up a management team to control APP's Indonesian operations during restructuring, an IBRA source told Dow Jones Newswires Friday. The team will include representatives of IBRA, foreign export credit agencies, and APP, the source added.
The new plan also includes "punishments" for APP if they fail to keep to the terms of the restructuring, the source also said. No other details were available.
The foreign export credit agencies have asked to study the proposal with their lawyers, before meeting with IBRA again Monday, the source said. Foreign export credit agencies were unavailable for comment on Friday.
The export credit agencies had proposed in February that IBRA agree to set up an independent holding company to monitor cash- flow during restructuring, and include a mechanism which would allow creditors to take control of APP's four Indonesian units in the event of a second default. It remains unclear how far IBRA's new plan goes toward satisfying the export credit agencies' proposals.