Some principal creditors sign APP debt restructuring scheme

Some principal creditors sign APP debt restructuring scheme

M. Taufiqurrahman, The Jakarta Post, Jakarta

A number of principal creditors of Asia Pulp & Paper Co. Ltd.
(APP) of Singapore signed a nonbinding debt restructuring plan on
Tuesday as an initial step toward reaching a final settlement for
the US$6.9 billion debt owed by the company's Indonesian
subsidiaries.

The vice chairman of APP's restructuring team, Gandi
Sulistyanto, said that 40 percent of the principal creditors had
agreed to sign the agreement, referred to as a key terms
restructuring summary.

Under the agreement the Indonesian subsidiaries will be asked
to repay $1.2 billion of their $6.7 billion debt within 10 years.

Also, APP, which is controlled by the Eka Cipta family, can be
declared in default if 75 percent of the creditors agree.

If the creditors fail to obtain the 75 percent support for
default, they can take a second vote, with a 67 percent
requirement, a third (51 percent) and fourth (25 percent). All
stages must be completed within 180 days.

Tuesday's agreement also enables creditors to convert their
loans to equity and to take over APP's Indonesian companies.

Among the principal creditors that signed the agreement were
the Indonesian Bank Restructuring Agency (IBRA), nine countries
under the umbrella of Export Credit Agencies (ECA), two Japanese
trading companies, and the rupiah bondholders.

U.S. bondholders failed to sign the agreement as their
country's security law prohibits creditors from making a deal
before a confidentiality agreement is established.

After the signing of the agreement, key terms will soon be
translated into a legally binding restructuring scheme that will
be signed in early July 2003.

Nicky Tjan, a legal advisor to APP, said that the key terms
would soon be discussed with the creditors that had not signed
Tuesday's agreement.

"I think, shortly after this signing, we shall speak to the
other creditors, especially bondholders, who have not been
involved in this negotiation, and try to explain this deal," Tjan
said.

Despite the signing, hundreds of U.S. dollar bondholders were
left in the cold as they were excluded from the negotiation on
the debt restructuring mechanism. The creditors were absent from
the negotiation because they had no representative for the
dialogue.

Credits held by the bondholders account for 56 percent of
APP's debt, worth $6.5 billion. Creditors who do not sign the
debt restructuring scheme will not get credit repayment from APP,
which thus far has placed around $279 million in an escrow
account.

APP defaulted on its $13.9 billion debt in March 2001. That
was one of the largest defaults in the history of emerging
markets. The debt included $6.7 billion owed by APP's four
Indonesian paper companies, PT Indah Kiat Pulp & Paper, PT Tjiwi
Kimia, PT Pindodeli Pulp & Paper and PT Lontar Papirus Pulp &
Paper Industries.

Apart from those in Indonesia, APP also has a number of
production facilities in China.