S&P lowers Tjiwi Kimia debt rating

S&P lowers Tjiwi Kimia debt rating

JAKARTA (JP): Standard & Poor's announced on Friday it lowered
the senior debt ratings and corporate credit ratings of P.T.
Pabrik Kertas Tjiwi Kimia Tbk. to 'D' from triple-'C'-plus and,
at the same time, removed the ratings from CreditWatch.

This action follows the company's failure to make scheduled
Feb. 1, 2001, interest payments totaling US$43.3 million on two
senior debt issues. The two issues provide for a grace period of
five and 30 days, Standard & Poor's said in a statement.

However, the growing liquidity problems of the company's
parent, Asia Pulp & Paper Co. Ltd. (APP), make payments within
the grace period a challenging scenario.

Ratings on APP, its other operating subsidiaries - P.T. Indah
Kiat Pulp & Paper Corp. Tbk., P.T. Pindo Deli Pulp & Paper Mills,
P.T. Lontar Papyrus Pulp & Paper Industry, and APP China Group
Ltd. (APP China) - and their guaranteed subsidiaries, are lowered
to triple-'C'-minus from triple-'C'-plus, and remain on
CreditWatch with negative implications.

In the event Tjiwi Kimia does not cure its interest payment
defaults within the respective grace periods, an acceleration of
debt in APP and its other subsidiaries could result, which would
seriously exacerbate the liquidity problems across the entire
group.

The highly integrated nature of the group's operations,
including wholly and majority-owned subsidiaries and affiliated
companies owned by APP's controlling shareholders that hold the
group's main forest resources, make further defaults by some or
all of the rated companies likely to follow.

Standard & Poor's further said it would regard as a default
any debt restructuring that requires creditors to take a
reduction in value of their financial exposure to the group.

Although the APP parent is domiciled in Singapore, the
location of the bulk of the group's subsidiaries and operating
assets in Indonesia and China would make it very difficult for
creditors of the group to protect and enforce their rights and
remedies, if a series of defaults unfold.