IBRA reaches deal on APP debt restructuring plan

IBRA reaches deal on APP debt restructuring plan

M. Taufiqurrahman, The Jakarta Post, Jakarta

After protracted negotiations, the Indonesian Bank
Restructuring Agency (IBRA) and foreign creditors grouped under
the Export Credit Agency (ECA) agreed on Friday on a debt
restructuring deal for Asia Pulp & Paper (APP).

IBRA deputy chairman for credit and asset management, Mohammad
Syahrial, said all parties had agreed upon a default mechanism
that would protect creditors if the Singapore-based APP went into
a second default.

"The definitive restructuring agreement was signed early this
morning," he said.

Under the agreement, APP can be declared in default if 75
percent of creditors agree to the move. If the creditors fail to
obtain 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 a fourth vote with a threshold of only 25
percent. All of the stages must be completed within 180 days.

The agreement also enables creditors to convert their debt to
equity and to take over APP's Indonesian companies.

Syahrial said the agreement still had to be presented to the
Financial Sector Policy Committee (FSPC) for approval. The
committee, a group of senior economic ministers, has the final
say on major deals undertaken by IBRA.

"We plan to hold a meeting with the FSPC late in the afternoon
(on Friday)," he said.

FSPC, which groups senior economic ministers and holds the
final say on any major transaction made by IBRA, approved the
deal, a source said.

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 aftermath of the late 1990s financial crisis.

The deputy chairman of IBRA added that the agreement would be
signed by all parties involved by the first week of July at the
latest.

"We need to complete the administrative work and the
arrangements for the collateral," he said when asked why the
deal could not be signed immediately.

In March 2001, APP defaulted on $13.9 billion in debt, one of
the largest defaults in the history of emerging markets.

The debt includes $6.7 billion owed by APP's four Indonesian
paper companies -- PT Indah Kiat Pulp & Paper, PT Tjiwi Kimia, PT
Pindodeli Pulp & Paper and PT Lontar Papirus Pulp & Paper
Industries.

Earlier this year, 11 governments of foreign creditors sent a
letter to President Megawati Soekarnoputri asking her to
intervene in the restructuring of the APP debt.

The letter, cosigned by the ambassadors of Canada, nine
European countries and Japan, urged the President to order her
ministers to supervise IBRA to ensure a fair, commercially
reasonable and transparent restructuring of Asia's largest paper
producer.