Court challenge for Asian paper giant

APP: "The legal action poses risks for all stakeholders"

A legal move led by two creditor banks which want to wrestle control of a leading Asian paper producer from its management has been met with tough resistance.

The present management and the Widjaja family does not appear to be sincere in its efforts to restructure the debts of the APP Group

Deutsche Bank and BNP Paribas

Asia Pulp & Paper has described the move by Deutsche Bank and BNP Paribas as perilous to suppliers, creditors, customers and employees.

The banks, which are trying to recover $210m (£137.6m) owed to them, have accused APP of dragging its feet and unduly delaying the restructuring of its $13.9bn debts.

But a defiant APP chief executive, Teguh Wijaya, insisted that "the legal action in Singapore runs contrary to everything we have been trying to achieve in the consensual debt restructuring process".

The action "needlessly creates significant economic risks for all stakeholders", he added.

Building support

Deutsche Bank and BNP Paribas hope their High Court petition in Singapore will help rally the support of more than 50 major creditors who were hit when APP suspended repayment of its debts in March last year.

APP intends fully and vigorously to resist the petition

APP

These include investors who have bought APP bonds, banks which have lent the conglomerate money, export credit agencies and APP's trading partners.

The banks believe APP is making money and blame the slow debt restructuring on the controlling Widjaja family's grip on the APP conglomerate which comprises more than 150 companies in China, Indonesia, Malaysia, Mauritius, Singapore and the United States.

"The present management and the Widjaja family does not appear to be sincere in its efforts to restructure the debts of the APP Group," Deutsche Bank and BNP Paribas said.

APP has rejected the allegation.

"There are complex inter-creditor tensions and conflicts which have the unfortunate, though real, effect of complicating and lengthening the restructuring discussions," APP said.

Accountants

The banks want the High Court to order the replacement of APP's management with judicial managers - in effect a firm of accountants - while the restructuring takes place.

"The main aim may be to tell APP 'you have been fooling with us but now it's time to be more serious'", one banker familiar with the situation said.

But APP has remained defiant.

"APP intends fully and vigorously to resist the petition and ultimately to succeed in enhancing value for all stakeholders," APP said.