JAKARTA, Indonesia -- Asia Pulp & Paper Co. signed a $6.7 billion restructuring agreement with key creditors Thursday, but the U.S. Export-Import Bank filed a lawsuit in New York against the struggling company.
APP signed a master restructuring agreement with creditors led by nine foreign-government export-credit agencies -- including those of Japan and several European nations -- and the Indonesian Bank Restructuring Agency, a government body, which is APP's largest creditor.
Creditors holding about 40% of the $6.7 billion debt -- the amount owed by APP's Indonesian companies -- signed the agreement, said IBRA Chairman Syafruddin Temenggung. APP creditors holding at least 90% of debt must vote in favor of the plan before it becomes effective under the terms of the agreement.
IBRA hopes to have sufficient creditor support for the plan by March 31, Mr. Temenggung said. "Even after we signed the agreement today we still have a tough task to convince as many creditors as possible," he said.
The agreement is the product of months of wrangling between creditors and APP, which stopped making payments on its total $13.9 billion debt over two years ago, making it one of the largest defaulters in emerging-market history. The company, which is based in Singapore but has operations in Indonesia and China, owes money to hundreds of foreign creditors ranging from the export-credit agencies to pension funds and individual bondholders.
Getting other creditors to sign up could prove difficult given widespread criticism from those not involved in the deal about what they claim to be lenient treatment of APP. Under the agreement, a third of the $6.7 billion in debt involved won't be repaid for as long as 22 years.
The U.S. Exim Bank, which until recently had been part of efforts to spearhead the talks with the other export-credit agencies, launched a lawsuit Wednesday in a New York court in a bid to recover $104 million in debt owed by APP.
"Unfortunately, we believe that the final debt restructuring proposal is not fair and equitable to APP's creditors, and its repayment structure doesn't adequately reflect APP's ability to service its debt," the Exim Bank said in a statement.
A lawyer for White & Case LLP, APP's lawyers, said in Jakarta that the firm would contact the Exim Bank in an effort to stop the lawsuit and keep Exim involved in the consensual debt restructuring.
Other creditors have been taking separate legal action. Last week, the New York State Supreme Court affirmed that three U.S. fund-management companies have legal claims on assets pledged as security for borrowings by APP's Indonesian units. The creditors who sought the ruling -- GE Capital Corp., Oaktree Capital Management LLC and Gramercy Advisors -- also want a more favorable settlement of debts owed them by the APP units. Those debts total about $250 million in principal and unpaid interest on promissory notes issued by the units and guaranteed by APP.
Still, many APP creditors have argued for an out-of-court approach to the talks, saying legal action abroad, even if successful, is unlikely to be enforceable in the Indonesian court system.
Indeed, their lack of confidence in Indonesian courts was a major factor behind the decision by foreign export-credit agencies to reach a negotiated settlement with APP instead of going to court in Indonesia. Foreign export-credit agencies, including the U.S. Exim Bank, are owed $960 million by APP, the largest combined total of any foreign creditor group. IBRA is owed slightly more than $1 billion.
Deutsche Bank AG, which launched an unsuccessful legal action in Singapore against APP last year, was among those signing Thursday, said Andrew Saker, a director at Ferrier Hodgson, an advisory firm which is working with the foreign export-credit agencies.
The German bank, which is owed $193 million by APP, and BNP Paribas SA petitioned a Singapore court in 2002 to appoint an independent management for the company during the restructuring, but the action was unsuccessful. The banks argued that Indonesia's Widjaja family, the founders of APP, should be removed from management during the restructuring.
Under the Thursday agreement, the Widjajas will continue to run day-to-day operations of the company. The family has recently drawn criticism for trying to shield their China assets from claims by creditors to other parts of the group. "The family and APP's management are committed to the consensual [debt restructuring] agreement," Franky Oesman Widjaja, an APP director, said at Thursday's signing ceremony.
Other creditors that have opposed the plan, including some private bondholders, should give their support, said Yukio Kitazume, a vice chairman of Nippon Export and Investment Insurance, Japan's government export-credit agency. APP's bond prices have been improving on the secondary market in recent weeks, showing investors expect the deal to move forward, he said.
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