The signing has been seen as a significant step forward, and the agreement is expected to become legally binding in the next month.

Representatives of 11 export credit agencies signed the deal, along with the Indonesian Bank Restructuring Agency (IBRA), APPs single biggest lender, which is owed 645m.

Representatives from the Widjaja family, whose Sinar Mas group controls APP, were also present.

The creditors at the agreement represent around 40% of the 4bn owed by APPs Indonesian units.

For the agreement to become effective it must be approved by around 85-90% of the creditors, with major bondholders still to be briefed on its details.

The new set of provisions, proposed in April, call for the setting up of an overseeing committee to monitor cash flows and report on defaults if APP fails to meet its latest obligations.

If APP fails to get the required creditor approval, it could be forced to go to the Indonesian courts, where a more marginal vote would allow it to force other creditors to accept a new restructuring deal.

Industry analysts have said that failure to approve the latest deal would mean creditors would face new talks or take legal action.

APP has total debts of 8.3bn.

Story by Andy Scott