IBRA to attend APP-bond holders Singapore meeting

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) will attend a meeting of the ailing Asia Pulp and Paper (APP) company and its bond holders in Singapore on Monday.

IBRA said in a press statement, issued on the weekend, that the agency would represent the government as one of the largest creditors of APP.

The Singapore-based APP, which is listed on the New York Stock Exchange, is controlled by Indonesia's Sinar Mas Group.

The company called for a moratorium of its US$12 billion debt last month. The debt is considered the largest for a company in the emerging market.

IBRA, a unit of the finance ministry, agreed in January to guarantee about $1.3 billion debt of Sinar Mas' subsidiaries to Bank Internasional Indonesia (BII), in a bid to save the ailing bank.

Under the agreement, Sinar Mas, the founder of BII, will repay the loan in installments until September 2003.

But in return, Sinar Mas must pledge collateral assets worth about 145 percent of the total debt to IBRA plus a personal guarantee from the Sinar Mas founder.

The majority of BII's shares is now owned by IBRA after the government sponsored the recapitalization program of the bank in 1999.

Sources said among the assets pledged by Sinar Mas included those owned by APP's subsdiaries including the publicly listed pulp and paper maker PT Indah Kiat Pulp and Paper; paper maker PT Tjiwi Kimia; and nonlisted PT Pindo Deli Pulp and Paper Mills I and II; PT Lontar Papyrus Pulp and Paper Industry; and PT Purinusa Ekapersada.

The government decided to make the guarantee to protect BII from the negative impact of APP's debt woes.

But the pledging of the APP assets to IBRA has raised concern among the company's international bond holders.

Sources say IBRA may risk a legal battle with APP bond holders.

It is not clear whether IBRA will address the concern at the creditors meeting.

IBRA chairman Edwin Gerungan said: "IBRA will try to fully cooperate with other (APP) creditors and Sinar Mas to come up with a fair, transparent and quick (debt) restructuring program."

Meanwhile, Reuters reported that bond holders doubted a concrete rescheduling program would emerge at the Monday meeting.

"There will be some summary numbers and they will probably map out a broad timetable," said a bond fund manager in Hong Kong who holds APP's notes at the holding and operating company level.

APP has frozen its interest and principal repayments to preserve its cash.

The news agency quoted informed sources as saying that APP had no concrete plans ready for the meeting in Singapore, but was following the advice of financial adviser Credit Suisse First Boston to face its creditors and give them the latest update.

The sources said the Indonesian junk bond king -- much of APP's debt is rated D by various agencies -- may not seek a discount or "haircut" from its creditors on Monday, setting it up for a long and painful rescheduling process.(rei)