UPM-Kymmene and APRIL to continue negotiations

UPM-Kymmene Corporation and the Singapore-based APRIL Group (Asia Pacific Resources International Holdings Ltd.) reaffirmed their strategic alliance on 6 March 1998. Under the Share Exchange Agreement with UPM-Kymmene whereby the parties were expecting to perform a 30% share swap of their respective fine paper businesses, one of the conditions precedent requirements is that all three paper machines are in commercial operation by 31 December 1999. Due to the economic crisis in Asia and the unstable conditions in Indonesia, the third paper machine cannot be completed in time. As a result, the Share Exchange Agreement as originally contemplated will not be implemented in its present form. However, UPM-Kymmene remains as 49% shareholder in the fine paper mill in China (AP Suzhou). The parties will continue discussions to further the alliance.
Following the repayment by AP Suzhou to UPM-Kymmene of the loan of USD 121 million, UPM-Kymmene has advanced such amount to APRIL as a loan, with an option to convert it to Riau pulp mill RAPP shares (approximately 15%) at net asset value, as foreseen in the agreements signed in March 1998. Such option will expire on 31 December 1999 at which time, the loan will be extended for a further 2-year period on commercial terms.