U.S. Orleans Investment wins bid for APP $880 million debt
The Jakarta Post, Jakarta
U.S. investment company Orleans Investment has been named as the winning bidder to pay off Asia Pulp and Paper's (APP) US$880 million debt owed to the Indonesian Bank Restructuring Agency (IBRA).
IBRA deputy chairman Mohammad Syahrial said on Tuesday that Orleans finally won the bid after APP's main creditors, mostly international firms, rejected the agency's request to allow the pulp and paper giant to repurchase its own debt.
"Orleans Investment is the winning bidder. Its final," he announced.
The U.S. firm paid for the debt for the discounted price of $213 million and now will work directly with APP to get the debt repaid to it.
IBRA had previously asked APP to repurchase the debt at a price of one percent higher than the winning bid, to allow a reduction in APP's debt level.
Syahrial did not elaborate as to the specific reasons why the foreign creditors rejected the IBRA debt buyback proposal.
APP is a holding company based in Singapore with operations in Indonesia and China. The group's Indonesian operations have a total debt of around $6.7 billion including those owed to IBRA. (If combined with the China operations, APP's total debts amount to $13.9 billion).
IBRA and APP's foreign creditors for around three years have been trying to seek an acceptable method for APP to repay the debts, after the company defaulted on many of them in March 2001.
IBRA and other creditors holding around 40 percent of APP's debts voted in October this year for a debt rescheduling mechanism.
But other creditors rejected the rescheduling plan as it was deemed to be too heavily weighted toward APP as it would give the company up to 22 years to repay much of what it owes. The creditors have been seeking a better deal and have taken legal measures.
APP Indonesian operations initially owed IBRA some $1 billion, making the agency the largest creditor. The agency took the bad loans from troubled banks in the wake of the late 1990s financial crisis. But APP founding owners, the Wijaya family repaid part of the IBRA loans mainly by surrendering shares in Bank Internasional Indonesia (BII), formerly the financial arm of the family.