IBRA signs APP debt pact but foreign creditors abstain
IBRA signs APP debt pact but foreign creditors abstain
Dow Jones, Jakarta
The Indonesian Bank Restructuring Agency, or IBRA, signed an outline US$6.5 billion debt workout with Asia Pulp & Paper Co. (PAP) Wednesday, but the refusal of many foreign creditors to agree to the plan means that reaching a final restructuring is unlikely in the near future.
In a ceremony in Jakarta, IBRA, local banks and bondholders signed the agreement, which covers debt held by APP's four Indonesian units. Singapore-based APP, which has operations in Indonesia and China, stopped repaying its debt in March 2001 after years of over-borrowing.
IBRA wants foreign creditors to agree quickly to the debt plan, and organized Wednesday's signing ceremony despite conflict among creditors on how to proceed, say people close to the talks. The government agency, which is APP's largest single creditor with $1 billion in debt, has said it wants creditors to sign a final debt agreement by May. 31.
But a number of foreign creditors have rejected the outline debt plan. A committee representing APP's foreign bondholders last week urged other creditors not to sign IBRA's deal Wednesday and submitted an alternative restructuring plan to the government agency. Foreign creditors were largely absent Wednesday from the signing ceremony.
Under IBRA's plan signed Wednesday, the principal and interest for about $1.2 billion of the Indonesian operations' debt will be repaid over 10 years, while for $3 billion of the debt only interest will be paid over 10 years, and that debt will then be refinanced. A further $2.3 billion of debt will be refinanced with a convertible bond. The plan assumes APP will earn an average of $750 million a year before interest, taxes and depreciation.
Foreign bondholders say they are concerned IBRA's debt workout pushes for the restructuring of the Indonesian debt without working out a plan for the Singapore holding company and China company borrowings, which total about $7.4 billion. Creditors holding debt from those companies might suffer, they say.
The bondholders also said IBRA's plan doesn't contain adequate provisions to allow creditors to take control of APP from its owners, Indonesia's Widjaya family, if they fail to keep to the terms of the restructuring.
APP's Indonesian companies comprise PT Indah Kiat Pulp & Paper, PT Pabrik Kertas Tjiwi Kimia, PT Lontar Papyrus and PT Pindo Deli Pulp & Paper