Malaysia revokes APP licenses
Malaysia revokes APP licenses
Patrick Chalmers, Reuters, Kuala Lumpur
Malaysia's Sarawak state, intent on keeping prized assets from creditors of debt-ridden Asia Pulp & Paper, has revoked licenses to plant an area over three times the size of Singapore, sources said on Wednesday.
Sarawak Chief Minister Abdul Taib Mahmud has signed an order reclaiming 200,000 hectares (494,000 acres) of land allocated for tree planting by Borneo Pulp and Paper Sdn Bhd. (BPP), a US$1.5 billion project majority-owned by Indonesia's debt-ridden APP.
"The Ministry of Resource Planning is going to release a statement tomorrow," a state government source told Reuters.
The move follows fruitless efforts by Sarawak Timber Industry and Development Corporation (STIDC) to revamp its deal with APP [APUUY.PK, 60 percent owner of a venture set up in June 1996.
A source close to BPP said Abdul Taib's hand was forced by a recent default notice served by creditors seeking return of a 250 million ringgit ($66 million) loan extended in March 2000.
BPP signed the three-year credit facility to develop acacia plantations and finance land preparation, planting maintenance and related infrastructure.
Allowing the default procedure to run could risk creditors' seizure of BPP's planting and land use licenses, the source said.
No one at lead bank Utama Merchant Bank, part of Sarawak retail Bank Utama, was immediately available for comment.
The seven-bank consortium includes Bumiputra-Commerce Bank Bhd., Bank Islam Malaysia, Bank Pertanian Malaysia, Citibank Bhd. and Amanah Merchant Bank Bhd.
Creditors to the Indonesian-controlled giant APP, which is $13 billion in debt, have called on the group to buck up with the restructuring of its loans.
The Singapore-headquartered APP, the largest pulp and paper group in Asia outside Japan, called a debt moratorium in March last year as operations tottered under the weight of a liquidity crunch, falling pulp and paper prices and ratings downgrades.
That signaled the start of major problems for its Sarawak joint venture, which involves a planned mill and plantation south of Bintulu on Borneo's northwest coast, said the source.
BPP suffered another blow last year when a group of indigenous Sarawakians won legal recognition of their native rights over a parcel of land leased to the company, a decision the state government has appealed.
The source said STIDC had also filed for arbitration in Singapore having become frustrated in attempts to advance the project since APP's debt crisis broke.
Singapore arbitration, the proceedings of which are confidential, could bring mandated changes to the joint venture including the buy out of APP's interests.