SINGAPORE, June 26 (UPI) -- The Indonesian Bank Restructuring Agency's decision to toughen its stance against the Sinar Mas group, one of the country's largest conglomerates, is providing a new headache for international investors and creditors. While they welcome the decision to take a hard line toward large debtors, they are also concerned that in the case of Sinar Mas, the government will get the money ahead of them.
IBRA is trying to recover over $60 billion it is owed for helping bailing out corporates and banks during the Asian crisis in 1997-1998. Many debtors have been dragging their feet, and in recent weeks, IBRA has indicated it would be ready to take legal action, especially against the largest debtors (the former bank owners) that owe alone more than $16 billion.
Earlier this month, IBRA told Sinar Mas it would have to repay $240 million out of its total $1.2 billion debt to the agency by the end of this month. Sinar Mas accumulated the debt through loans it took with PT Bank Internasional Indonesia, which it used to own, to help various units, especially Asia Pulp & Paper, to which $1 billion of the borrowing went to.
If Sinar Mas does not comply, the agency has indicated it will start selling some of the group's assets, which were pledged against the debt, and those include assets of APP.
APP is involved in one of the largest debt restructurings in Asia, owing an estimated $13.4 billion to hundreds of creditors. IBRA is APP's single largest creditor.
So far, debt negotiations have been very slow. Creditors rejected a company debt-restructuring plan in February, and have put forward a debt-restructuring proposal, whose main points have been in principle agreed to by APP. But both sides said there is still a very long road ahead, as creditors favor a debt rescheduling over five years, compared with APP's proposed 13 years.
One of the main difficulties facing creditors has been the lack of information and transparency about APP's accounts. Late last year, the accounting firm Arthur Andersen LLP resigned from its role as APP's auditor after being named in several class-action suits in the United States, and audited accounts for 2000 have not been released yet.
APP creditors are now concerned IBRA's attempts to get money from Sinar Mas will leave the company with few assets left to repay its debt to commercial creditors. APP has already favored Indonesian creditors over international creditors, when it agreed last year to repay some of the interest due on local bonds.
On Monday, Deutsche Bank and BNP Paribas filed a petition at the Singapore High Court to seek appointment of an independent management for APP to work with the company's creditors while it undergoes restructuring.
The petition said the current management and the Widjaja family (who controlled APP) are "largely responsible for the overexpansion and overextension" of APP, which had at one stage branched out in China and India. The petition also said creditors feared APP was hiding assets that should be included in the restructuring. The two banks are seeking to get debts worth over $200 million.
"The petitioners and indeed the creditors have lost faith in their (management's) ability to manage the debts of the APP Group," it said, adding that APP management has been trying to "drag matters out" on debt-restructuring.
IBRA has indicated that it was willing to work with APP creditors on a debt plan for the company, but that it would only sit down for talks after Sinar Mas met its debt deadline this month.
