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.