After a closed-door meeting, Asia Pulp & Paper (APP) creditors have rejected the company's opening offer to reschedule most of its US$13.4 billion debt.
The company, part of Indonesia's second-largest conglomerate Sinar Mas, which is owned by the Widjaja family, defaulted last March on its massive debts to Indonesian and foreign investors.
A group of advisers, led by Credit Suisse First Boston, have been promising a restructuring deal since then.
The opening offer at yesterday's meeting in Jakarta was inconsistent with fundamental principles, sources said. It offered to start paying interest on company bonds if repayment was stretched to at least 10 years.
Some reports said the repayment offered would take 13 years, a figure probably based on the decade-long delay and the fact that much of the bond debt should mature three to four years from now.
Whether seen as 10 or 13 years, it was too long for the creditors to accept, said a banker who attended the meeting.