S'pore court rules against APP creditors

S'pore court rules against APP creditors

Dow Jones, Singapore

The Singapore High Court Thursday ruled against a petition by
two European creditors of Asia Pulp & Paper Co. to appoint
independent judicial managers for the debt-ridden Indonesian
company.

"If I granted the JM (judicial management), there will be a
lot of problems, not insurmountable but very difficult," said
judge Lai Siu Chiu, delivering the verdict.

As APP was incorporated in Singapore as a holding company, the
judicial managers will find it difficult to restructure the
group's units in Indonesia and China, Lai said.

The verdict is against the petition by Deutsche Bank Ag (DB)
and BNP Paribas, which initiated court action in June to recover
the US$193 million and $20 million that APP owes them
respectively.

The court's ruling means APP's current management can stay on
and the company can continue with the restructuring led by
Indonesian Bank Restructuring Agency (IBRA).

The two European banks had argued that IBRA isn't equipped to
mandate APP's restructuring due to conflict of interest.

IBRA's dual roles as creditor to PT Bank International
Indonesia, or BII, and lead manager of APP's restructuring
process would put it in an awkward position, the banks told the
court. APP's biggest shareholder, the Widjaja family, once
controlled BII.

The appointment of judicial managers from international
accounting firms will restore faith and trust among existing
creditors and guarantees fair play in APP's restructuring, the
two European banks had argued.

However, Justice Lai said: "The Widjaja family can deliver
what is required to repay if they pool their resources together."

Last month, IBRA, backed by other big creditors, demanded that
APP make a $100 million cash payment as part of the restructuring
process. Part of the deal included a $30 million monthly payment
into an escrow account.

APP's lawyers said there is currently $60 million in the
escrow account.

"If the management can come up with the money, the
restructuring will hold," Judge Lai said.

She warned that APP is the largest emerging market defaulter
and its Widjaja family-controlled current management must be more
serious in their approach toward the restructuring process.

IBRA representatives, an umbrella steering committee of
creditors and APP's management are meeting in Singapore Thursday
to discuss issues related to the company's cashflow.