Sinar Mas's APP faces U.S. delisting, credit crunch
Sinar Mas's APP faces U.S. delisting, credit crunch
JAKARTA (Dow Jones): Asia Pulp & Paper (APP), among the largest issuers of high-yield bonds, is facing delisting of its U.S. American Depositary Receipts after they Wednesday traded below $1 for the 30th consecutive day.
Analysts said a delisting of Asia Pulp & Paper, or APP, the Singapore-based holding company for Indonesia's Sinar Mas Group, may trigger a credit crunch if secured noteholders who hold put options on the stock demand immediate repayment.
If the company can't repay options for $870 million, it may be forced to default on these notes, triggering cross-defaults on other APP paper, said Lin Che Wei, analyst at SG Securities.
"They are in a fix, because today is D-Day for the APP listing," he said.
APP has borrowed almost $10 billion from mainly foreign lenders to finance a rapid expansion in pulp and paper production in Indonesia and China. But its shares have plummeted recently on fears it can't meet repayments and won't be able to refinance outstanding issues.
Shares in APP closed Wednesday at 7/8, down from 15/16 Tuesday. Under Security & Exchange Commission rules, shares can be delisted if they trade below $1 on 30 consecutive days.
A spokesman for APP, Jan Partawijaya, said Thursday the New York Stock Exchange hadn't notified the company of any delisting.
"We've not received a letter from the NYSE," he said.
He declined to comment further on the possible delisting or the implications for APP noteholders.
Lin said a U.S. delisting would trigger put options on two APP notes with a face value of $870 million. Failure to repay this amount would put in jeopardy the company's plan to restructure $3.1 billion in debt falling due in 2001, he said.
Analysts said the implications for APP's listed Indonesian units - pulp concern PT Indah Kiat and paper maker PT Tjiwi Kimia - remain unclear, as some of APP's outstanding debt was issued by these units.
At 0650 GMT (1:50 a.m. EST), shares in Indah Kiat were down 2.9 percent to Rp 825, while Tjiwi Kimia was unchanged at Rp 550.
Shares in both companies have been hit hard in recent months by concerns over APP's mountain of debt, declining profit margins and soft global pulp prices.
Adding to APP's debt headache is the Sinar Mas Group's pledge to repay Rp 13.7 trillion in loans to PT Bank International Indonesia (P.BII), formerly its group bank and now majority-owned by a government agency.
The first installment of Rp 1.37 trillion has been delayed until Sept. 30, from March 31. The new schedule gives Sinar Mas until September 2002 to repay these loans.
In 1999, the Indonesian government injected Rp 6.6 billion into BII and took a 57 percent stake in what is one of the country's largest retail banks. The Widjaja family, founding shareholders of Sinar Mas, own 27 percent of BII.