Singapore-listed pulp and paper company United Fiber System Limited has announced that it has entered into a $225 million financing agreement with Hong Kong-based hedge fund Abax Global Capital. The Morgan Stanley-backed fund was launched in Hong Kong earlier this month.

The financing agreement is in two parts. The first component is made up of $25 million worth of zero coupon convertible bonds that mature in 2012. The conversion price is S$0.355 per share and the bonds represent 4.4% of United FiberÆs share capital.

The second component comes in the form of equity. United Fiber says it has executed a memorandum of understanding that will see Abax invest $200 million in equity in its Indonesian subsidiary PT Marga Buana Bumi Mulia. United Fiber recently completed construction of a wood-chip mill, which is now in its first year of production, and now it is in the process of constructing a $900 million pulp mill in Kalimantan, Indonesia.

It is expected that the ultimate financing package will be announced in the next couple of months and will consist of secured notes and equity warrants. The remaining funds for plant construction will be drawn down from bank and vendor financing.

As part of AsianInvestorÆs series of articles on the evolution of AsiaÆs special situations sector, the predominant theme in Asian alternatives for 2007, we spoke to United FiberÆs CEO Jaka Prasetya. We discussed the growth of special situations financing provided by hedge funds û this time looking at the issue from a new viewpoint, that of the industrialist himself. This interview is being published in the next edition of AsianInvestor magazine.