[Kabar-indonesia] RGM Group, creditors agree to restructure $1.5b debt

[Joyo at aol.com]

The Jakarta Post
Thursday, November 2, 2006

RGM Group and creditors agree to restructure $1.5b debt

The Jakarta Post, Jakarta

After more than two years of negotiations, PT Riau Andalan
Pulp and Paper, PT Riau Andalan Kertas and PT Riau Prima
Energi, all subsidiaries of the Raja Garuda Mas (RGM) Group,
have concluded a new loan restructuring agreement with
state-owned lenders Bank Mandiri and Bank Negara Indonesia
(BNI).

The new agreement, which revises the US$1.51 billion debt
workout signed in 2002, more than doubles the debtors'
annual interest and principal payments from $61.2 million to
$140 million, and extends the loans' maturities to 2016, RGM
said in a Wednesday press release.

Mandiri and BNI said earlier in separate releases that,
similar to the 2002 debt restructuring deal, the new debt
workout agreement did not afford any debt reductions to the
RGM subsidiaries.

Nor had the debtors ever missed on interest and principal
payments under the 2002 debt restructuring agreement, the
two banks asserted in statements apparently aimed at
clarifying the controversy over the RGM debt that has raged
over the past two years.

All payment obligations remained due and owing in accordance
with the prevailing credit agreement, the banks pointed out.

They said the new restructuring deal was necessitated by
Bank Indonesia's new banking regulations on lending and the
substantial improvement in the financial performance of the
group as a result of steep rises in pulp and paper prices.

"I greatly welcome this new loan agreement as it is mutually
beneficial to both parties and at the same highlights the
better performance of our group," RGM Indonesia president
Ibrahim Hasan said.

The two state banks are the biggest creditors and leaders of
the 15-member syndicate of domestic and foreign lenders that
extended loans to the RGM units for the development of one
of the world's largest pulp and paper industrial complexes
and plantations, as well as the supporting infrastructure,
in Riau in the early 1990s.

The loans turned sour after the 1997-1998 economic crisis
when the rupiah collapsed to as low as Rp 15,000 against the
U.S. dollar, interest rates on rupiah loans skyrocketed to
as high as 70 percent, and the interest rate on dollar loans
rose to 30 percent.

What made things even bleaker for the RGM business was that
pulp prices also fell by 30-40 percent between 1997 and
1999.
But in 2002, RGM and the creditor syndicate agreed to
restructure the loans under a $1.51 billion debt workout
comprising $1.08 billion in principal and $428 million in
interest-payment arrears, foreign exchange losses and
deferred interest payments.

Both the pulp and paper companies are subsidiaries of the
Singapore-registered APRIL (Asia Pacific Resources
International), one of the world's leading pulp and paper
producers with production facilities in Indonesia and China.

RGM International, which is also registered in Singapore, is
a widely diversified industrial group operating in the
fiber, pulp, paper, palm-oil, engineering and construction
sectors in Indonesia, China, Finland and Brazil.

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Joyo Indonesia News Service
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