IBRA upbeat about settling APP's debt deal as scheduled
IBRA upbeat about settling APP's debt deal as scheduled
The Jakarta Post, Jakarta
The Indonesian Bank Restructuring Agency (IBRA) is optimistic
it will meet the March 31 deadline for the long-debated
restructuring of US$6.7 billion worth of debts owed by four local
units of Asia Pulp & Paper (APP) Co. Ltd.
Syafruddin Temenggung, chairman of IBRA -- APP's largest
single creditor with $1 billion owed, said on Tuesday that the
agency would meet with foreign creditors to settle one of the
world's largest corporate-debt workouts.
"We have six days to go (to the deadline). This can still be
done because starting tomorrow, we'll be meeting them,"
Syafruddin told reporters as reported by detik.com.
Syafruddin was referring to a debt workout, the outline of
which was agreed to by IBRA and APP in December last year, which
would allow the restructuring of about $1 billion in debts owed
by the four companies.
The four in question are PT Indah Kiat Pulp & Paper, PT Tjiwi
Kimia, PT Pindodeli Pulp & Paper and PT Lontar Papirus Pulp &
Paper Industries.
Two years ago, the Singapore-based APP pulp and paper producer
defaulted on its $13.9 billion in debts. The December proposal is
part of efforts to restructure part of those debts.
However, foreign creditors have fiercely opposed the plan --
including export credit agencies from Europe, the U.S. and Japan
-- creating a much-publicized standoff with IBRA.
As many as 11 export-credit agencies, who have collectively
lent another $960 million, claimed that the plan carries
repayment terms that are too lenient.
Under the December terms, the four firms will repay just $1.2
billion of the $6.7 billion they owe in the next 10 years, while
the rest will be refinanced, or exchanged for a convertible bond.
They argued that the scheme lacks incentive for creditors and
even encouraged APP to default again on its debts.
In February, they proposed an alternative deal which basically
centers on two additional clauses to the December proposal.
They are: the establishment of a company which oversees and
exercises tighter control of APP's cash flows and a plan that
could force the Widjaja family -- APP's founders -- to put its
shares into an escrow account which would then automatically be
transferred to creditors, in the event of another default.
IBRA objected to such a plan, saying it would run counter to
existing regulations prohibiting monopoly practices and
protecting minority shareholders' rights.
The standoff between IBRA and the 11 foreign creditors reached
a new height two weeks ago when representatives from the
creditors wrote a letter to President Megawati Soekarnoputri,
pleading with her to break the impasse.
However, Syafruddin confirmed that based on his meetings with
the representatives, the letter was never intended to force the
commercial deal into a government-to-government deal.
"The deal will still be settled commercially, between
creditors and debtors, and among creditors as well," he said.