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.