Asia Pulp & Paper (China) Investment aims to raise up to 3 billion renminbi ($457 million) through a bond issue, reports IFR Asia (subscription required).
The company is owned and operated by the Widjaja (Wijaya) family, which was involved in the collapse of Asia Pulp and Paper, a forest products firm that defaulted in 2003 while owing $13.9 billion, the largest-ever corporate default in Asia at the time. APP China emerged when its creditors converted debt into equity in a Bermuda-registered holding company, which protected APP China’s assets from creditors’ claims, according to IFR Asia.
“The move to set up APP China left creditors of APP itself furious as they lost access to many of the company’s most valuable assets,” states the IFR Asia article.
 Concession belonging to PT. Tebo Multi Agro (TMA), an affiliate of APP, on the southern part of the Bukit Tigapuluh landscape in Sumatra. Photo courtesy of Greenpeace. |
The article notes that APP has twice “flirted with” capital markets since its historic 2003 default, including an initial public offering (IPO) in Hong Kong or China in 2006 and an share offering of a subsidiary—Gold East Paper—in 2009. Both deals never came to fruition.
IFR Asia says APP may be looking to capitalize on Chinese investors’ lack of awareness of the company.
“Those involved in App China’s deal may be hoping that investors in the Chinese bond markets are unaware of – or are willing to overlook – that controversial history,” it states, noting that APP China got an AA+ rating from Dagong, a ratings agency based in Beijing.
The bonds will be used to boost APP China’s capital and replace bank loans.
APP is also controversial outside financial markets. Environmentalists have linked its subsidiaries to large-scale deforestation in Indonesia and China. The revelations have led to a number of high profile customer defections, including Walmart, Staples, and Office Depot, among others.
APP has waged an aggressive public relations campaign in an effort to improve its image. Its parent, the conglomerate Sinar Mas, last year hired former U.S. Ambassador to Indonesia Cameron Hume shortly after he left office.
CITATION: Controversial APP China turns to renminbi bonds. IFR Asia 1875 19 March to 25 March 2011.
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