Indonesia's Widjajas: How APP unravelled to become the biggest EM corporate defaulter in history

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The financial woes at APP in 2001, which led to its default and subsequent debt restructuring, opened up a can of worms within the wider group.

by Sara Webb

• APP disclosed to creditors in 2001 that it had made a $220 million loss on two derivatives contracts, which had never appeared in its financial statements. It said its financial statements for 1997 to 2000, which were audited by Arthur Andersen, might have to be restated. 


Eka Tjipta Widjaja,
patriarch of Sinar Mas

Some bankers questioned why the group had kept these two derivatives contracts quiet, who had authorized these transactions and whether there had been any need to do such deals in the first place. A few years earlier, APP had had to disclose hits on other risky derivatives contracts in its New York listing prospectus; in that instance, members of the Widjaja family agreed to bear the substantial cost of terminating the transactions. 


In an email to representatives of APP, Sinar Mas, and the Widjaja family,...