/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/000126.MBX T R O U B L E D C O M P A N Y R E P O R T E R A S I A P A C I F I C Wednesday, January 26, 2000, Vol. 3, No. 18 Headlines * C H I N A & H O N G K O N G * CABLE & WIRELESS HKT: SingTel may merge with it e-KONG GROUP: Stock trading suspended MULTIWAYS CONTRACTORS LTD: Facing winding up petition PAM & FRANK INT'L HOLDINGS: Reports to HKSE on rehab SUNFAME HOLDINGS LTD: Facing winding up petition URATA SUSHI SHOP LTD: Facing winding up petition * I N D O N E S I A * BANK BALI: New suspects in scandal BANK INDONESIA: Hands over two banks to IBRA * J A P A N * UNITIKA LTD.: Forging ahead with group restructuring * K O R E A * DAEWOO GROUP: Creditor breakthrough thru debt write-off DAEWOO GROUP: South Korea accelerates clean up * M A L A Y S I A * RENONG BHD: Taking steps to raise funds to retire debts * P H I L I P P I N E S * CONSOLIDATED MINES: Receiver's term extended 6 months MEGA DATA: Gov't to probe Justice secretary, brother PETRON CORP.: Involved in tax credit fraud PHILIPPINE NAT.BANK: Gov't cuts privatization target anew PHILIPPINE NAT.BANK: Stock analysts say hold or avoid PILIPINAS SHELL PETROLEUM: Involved in tax credit fraud * S I N G A P O R E * NEPTUNE ORIENT LINES: S&P gives credit "junk" status OSPREY MARITIME: S&P gives credit "junk" status SAMUDERA SHIPPING: S&P gives credit "junk" status * T H A I L A N D * BANGKOK BANK: Fitch keeping eye on rating BANK OF ASIA: Fitch keeping eye on rating BANK OF AYUDHYA: Fitch keeping eye on rating BANK THAI: Closes 42 branches in streamlining drive DBS THAI DANU BANK: Fitch keeping eye on rating KRUNG THAI BANK: Seeks B350m to offset losses ONPA INTERNATIONAL PLC: To keep to debt plan SIAM COMMERCIAL BANK: Fitch keeping eye on rating THAI MILITARY BANK: Fitch keeping eye on rating THAI TEL.AND TEL.: Creditors to vote on debt plan ============================== C H I N A & H O N G K O N G ============================== CABLE & WIRELESS HKT: SingTel may merge with it ----------------------------------------------- Singapore Telecom yesterday announced that it is in talks to merge with its Hongkong counterpart, loss-making Cable & Wireless HKT, to form Asia's largest international telecoms company with a combined market capitalisation of nearly US$60 billion (S$100 billion). In a statement late last night, SingTel said it is in discussions with the United Kingdom's Cable & Wireless plc, the 54-per cent owner of C&W HKT, which until last year was known as Hongkong Telecom. The discussions "if successfully concluded, would lead to a proposed merger of equals between SingTel and Cable & Wireless HKT" and would "create a leading independent communications company in the Asia- Pacific region." SingTel said the talks are at a stage where there can be no certainty about their outcome, or that any agreement will be reached. No terms have yet been agreed for the proposed transaction. The only hint it gave was to say: "In the event that any proposal is made, it is likely to reflect market values of SingTel and C&W HKT for recent periods." SingTel's chief financial officer, Chua Sock Koong, told BT last night that it has still not been decided whether the deal will involve a share swap or cash. But Ms Chua said Temasek Holdings, the Singapore government holding company which holds a 76 per cent stake in SingTel, will emerge as the largest shareholder in the merged entity, should the deal go through. C&W will be the second largest shareholder. C&W rebranded HK Telecom in June last year in a move aimed at strengthening C&W's international identity. Yesterday's confirmation of the merger talks, rumoured in the market for weeks, came just two days after the Singapore government announced bold moves to fully liberalise the telecom market in the Republic. This would open SingTel's turfs -- both domestic and international -- to possible assault by practically all players. A major foreign tie-up is seen as the way for SingTel to make up for its expected fall in market share in Singapore. Yesterday, SingTel's share price plunged 33 cents or 10 per cent to $2.85 as a result of fears of the impact of increased competition. Based on their share prices yesterday, SingTel has a market capitalisation of S$44.1 billion (US$26 billion) while C&W HKT has a market cap of HK$231.5 billion (US$30 billion). Analysts said one rationale for the merger would be to allow the two firms to reduce their capital expenditure in developing new businesses such as interactive television and other Internet-related services, as they try to hold on to their shrinking traditional telephone markets. Combined, they can also embark on new region-wide initiatives such as Internet or e-commerce services, particular in the greater China region. Ms Chua, speaking to journalists in a conference call last night, described the proposed merger as "strategic". She said: "It will enable the merged entity to gain scope and scale. It will create a world-class telco with a combined market value of S$100 billion. It will be the largest among non-Japan Asian companies. More significantly, it will be largest international carrier in Asia." SingTel and C&W HKT carry 3 billion international call minutes, more than the 2.9 billion minutes carried by America's Sprint in 1998. The combined company will rank as the world's sixth largest international carrier. Should the deal go through, the new group will be a formidable force in the Asia Pacific region given that SingTel also has a strategic 5 per cent stake in Japan's largest international telecoms operator KDD. This means the new entity will have strongholds in the three major hubs in Asia -- Singapore, Hongkong and Japan. Ms Chua said: "The merged entity will have the leading market position in the MNC business in Asian markets, it will be the leading Internet backbone operator, and also the largest pan-Asian mobile operator. There will be significant growth opportunity if the merger is to be proceeded." And with the significant traffic between Singapore and Hongkong, the two groups can create a competitive charging structure, she said. For example in mobile services, there can be a preferential roaming agreement between them. The combined entity will have more than 4 million mobile customers in Asia. They can also provide hubbing services to multinational companies. Details, such as the listing status of the two companies, who would head the new entity, and where it will be headquartered, have yet to be decided. (Singapore Business Times 25-Jan-2000) e-KONG GROUP: Stock trading suspended ------------------------------------- Suspension of trading at the request of e-Kong Group Limited, trading in its shares has been suspended with effect from 10:00 a.m. today - 24 Jan 2000 - pending an announcement relating to a placement of shares. (Hong Kong Stock Exchange 24-Jan-2000) MULTIWAYS CONTRACTORS LTD: Facing winding up petition ----------------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing for February 9 on the petition of Yiu Hok Kwan for the winding up of Multiways Contractors Limited. A notice of legal appearance must be filed on or before February 8. PAM & FRANK INT'L HOLDINGS: Reports to HKSE on rehab ---------------------------------------------------- The board of directors ("the Board") of Pam & Frank International Holdings Limited ("the Company"), incorporated in Bermuda with limited liability,through William Yang Hung Yu, chairman, wishes to announce that we have noted the recent increase in the price of the shares of the Company and wish to state that we are not aware of any reasons for such increase. Beginning last week, the Board is in preliminary stage of negotiation with certain independent third parties, not connected with the directors, chief executive or substantial shareholders of the Company, or any of its subsidiaries or an associate of any of them regarding group restructuring and/or a change in control. However, no agreement has been reached as yet. Except for the above, the Board confirms that there are no negotiations or agreements relating to intended acquisitions of realisations which are discloseable under paragraph 3 of the Listing Agreement, neither is the Board aware of any matter discloseable under the general obligation imposed by paragraph 2 of the Listing Agreement, which is or may be of a price-sensitive nature. The Company will make an announcement as and when there is any further development. The group restructuring and/or a control in change as mentioned above may or may not proceed. Recently, there has been a number of writs filed against the Company and/or the subsidiaries ("the Group") in respect of outstanding claims from suppliers totalling HK$26.2 million which are in default. As of 31st December, 1999, the current liabilities of the Group amounted to HK$350 million (unaudited), inclusive of bank liabilities and other creditors. Contingent liabilities in respect of legal fees not provided in the above are estimated to be HK$400,000. Shareholders of the Company and investors are advised to exercise caution when dealing in securities of the Company. In addition, the Board is pleased to announce that Mr. Li Weiqiang has been appointed the Independent Non-Executive Director of the Company with effect from 21st January, 2000. He is not connected with any of the independent third parties mentioned above. (Stock Exchange of Hong Kong 24- Jan-2000) SUNFAME HOLDINGS LTD: Facing winding up petition ------------------------------------------------ The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing for February 9 on the petition of Lee Yuet Yung for the winding up of Sunfame Holdings Limited. A notice of legal appearance must be filed on or before February 8. URATA SUSHI SHOP LTD: Facing winding up petition ------------------------------------------------ The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing for February 23 on the petition of Lo Kam Ho for the winding up of Urata Sushi Shop Limited. A notice of legal appearance must be filed on or before February 22. ================= I N D O N E S I A ================= BANK BALI: New suspects in scandal ---------------------------------- The attorney general's office has named former Indonesian cabinet minister, Tanri Abeng, and a central Bank Indonesia official as suspects in the Bank Bali scandal, reports said Saturday. Enough preliminary evidence had been collected to name the two, and paperwork was underway to summon the suspects, Suhandoyo, spokesman for the attorney general's office was quoted by the Jakarta Post newspaper as saying. Abeng, an appointee of former strongman Suharto, was retained as state minister for the empowerment of state enterprises in the government of Suharto's successor BJ Habibie. Habibie was replaced in October when Abdurrahman Wahid won the presidential elections. He is the most senior suspect to be named in the case, which involves the payment of an US$80 million commission to a company connected with the then-ruling Golkar party to recover interbank loans. The BI official, Erman Munzir, worked in the central bank's supervision department and has since been suspended, the Post said. "The decision (to summon the two as suspects) was taken in a plenary team meeting which has been reported to Attorney General Marzuki Darusman," Suhandoyo said. Already named as suspects in the case are Djoko Chandra, the owner of the middle-man company, PT Era Giat Prima, former Bank Bali director Rudi Ramly, former Indonesian Bank Restructuring Agency (IBRA) official Pande Lubis and former Golkar MP Setya Novanto. In October last year detectives questioned Abeng but said at the time that they could find no proof that he was involved in the scandal. This was despite a finding in a PriceWaterhouseCoopers audit of Bank Bali which said some of the commission money had been paid into Abeng's account. (Business Day 24-Jan- 2000) BANK INDONESIA: Hands over two banks to IBRA -------------------------------------------- Bank Indonesia has handed over two category-A banks, whose capital adequacy ratio (CAR) declined to below the compulsory four per cent, to the Indonesian Bank Restructuring Agency (IBRA). The central bank's Governor Syahril Sabirin after meeting US Finance Minister Lawrence Summers here Thursday said the two banks would therefore assume a status of being restructured. He did not mentioned the banks' names but said one of them was a state bank. Meanwhile, the Memorandum on Economic and Monetary Policies signed on Wednesday (Jan 19) stipulates that today (Jan 20) is the deadline for category-A banks whose CAR is less than four per cent. IBRA's new chief Cacuk Sudarijanto, meanwhile, said he was completely ignorant of two banks being handed over. "I do not know anything about it because I was at the Ministry of Finance throughout Thursday," he said. In the meantime, the government's plan to recapitalise Bank Indonesia might be postponed since the Letter of Intent signed on Wednesday among other things set the end of May 2000 as the deadline for an investigative audit of the channelling of Bank Indonesia Liquidity Assistance. Finance Minister Bambang Sudibyo said on the occasion that the government's intention to recapitalise the central bank scheduled by the end of March 2000, must be postponed. However, he added, that the decision to recapitalise the bank would depend on an accountancy verification to find out whether the central bank's capital was negative or not. (Asia Pulse 21-Jan-2000) ========= J A P A N ========= UNITIKA LTD.: Forging ahead with group restructuring ---------------------------------------------------- Major textile maker Unitika Ltd. (3103) will accelerate restructuring of money-losing group firms, in line with its move to report earnings on a consolidated basis from this fiscal year, company sources said Sunday. Unitika has canceled dividend payments for six straight years. In 1999, it spun off its cotton-spinning and chemical fibers divisions. Unitika will make Terabo Co. (3128) a subsidiary by raising its stake in the firm to 69.1%, from 40.1%. On Monday, Unitika will pay 200 million yen to Fuji Kosan, Terabo's second-largest shareholder, for 2.89 million, or 29%, of Terabo's outstanding shares. Unitika and Terabo will cooperate in high polymer products, including film, plastics-processing and other chemical synthesis operations. An Osaka-based unprofitable subsidiary which produces cotton textiles will be liquidated at the end of March. Unitika will also make six affiliates which are suffering cumulative losses into wholly owned subsidiaries by reducing and then boosting their capital. Such restructuring will force Unitika to book some 4 billion yen of parent-only extraordinary loss for the year through March 31. However, the firm has already written off the losses, partly by setting aside loan-loss reserves. (Nikkei 24-Jan-2000) ========= K O R E A ========= DAEWOO GROUP: Creditor breakthrough thru debt write-off ------------------------------------------------------- An agreement by the main foreign creditors of Daewoo Group to write off some 60 percent of the group's foreign bank debt opens the way to resolving the future of the troubled South Korean conglomerate, analysts said Sunday. "It's a breakthrough," said Choi Ouk, an official with the government's Corporate Restructuring Coordination Committee, which has been negotiating with the foreign creditors for three months. Oh Ho Keun, chairman of the committee, said the agreement would take effect after 90 percent of the approximately 200 foreign creditors went along with the agreement struck Saturday with ABN-AMRO Bank NV, Arab Bank Ltd., Bank of Tokyo-Mitsubishi, Chase Manhattan Corp., Citibank, Dai-Ichi Kangyo Bank Ltd., HSBC Holdings PLC and National Australia Bank Ltd. Under the agreement, foreign creditors will receive payment equal to 32.3 percent of their loans to Daewoo Corp., the group's core construction and trading unit, and 35 percent of their loans to Daewoo Motor Co. But foreign creditors will be able to recover 67 percent of their loans to Daewoo Heavy Industries, a major shipbuilding company still believed to be relatively healthy. The agreement stipulates separate proportions ranging from 31.5 percent to 95 percent for the group's foreign subsidiaries. South Korean authorities appear certain to maintain close control over terms of the agreement, promising to support domestic banks in need of cash for buying back the foreign loans. The government also is pumping money into South Korea's investment trust companies to enable them to buy back Daewoo bonds from individual customers at 95 percent of their value beginning Feb. 8. Authorities see such strong measures as needed to stabilize a financial market that has shown signs of backsliding amid uncertainty about Daewoo's future. The South Korean stock market's main index, after cresting above 1,000 points near the end of last year, plunged into the low 900s last week, closing at 925.16, and bond yields have risen above 10 percent. Analysts said Sunday they believed that the foreign banks had agreed to accept the government's terms to ensure continuing good relations with Seoul as they looked ahead to future investments in South Korea, which is recovering from the economic crisis that caused the government to appeal to the International Monetary Fund for a bailout in November 1997. "They see Korea is recovering," said Pak Kie Joon, research associate at the Institute for International Economics in Seoul, referring to the foreign banks. "They know, if you're really too greedy, there will be no future business." The collapse of Daewoo Group when the economy was on the upswing represented the greatest failure of the economic crisis. Daewoo was by far the largest of a dozen conglomerates to fall apart as a result of excessive investment and borrowing that resulted in debt-equity ratios of approximately 6 to 1. Daewoo has total liabilities of 89 trillion won ($78.9 billion) and assets of 58.7 trillion won. The agreement opens the way for a long process of disposing of Daewoo companies. Daewoo Motor is currently the target of a potential bidding war pitting Hyundai Motor Co., the country's largest motor vehicle manufacturer and a leading member of Hyundai Group, the country's largest chaebol, against General Motors Corp. and Ford Motor Co. The official Yonhap news agency reported Sunday that local creditor banks would select Daewoo Motor's new management this week and said other Daewoo units would receive new loans. On Monday, the government will unveil market stabilization funds for investment trust firms that are facing huge redemptions of Daewoo-linked bonds Feb. 8, Yonhap reported. (The International Herald Tribune 24- Jan-2000) DAEWOO GROUP: South Korea accelerates clean up ---------------------------------------------- South Korea will speed up the rehabilitation and sale of Daewoo Group units, spurred by a breakthrough in drawn-out talks with foreign creditors, reports said yesterday. The country's Yonhap news agency said local creditor banks would select Daewoo Motor's new management this week. Other Daewoo units will receive new loans to improve their tattered business. Today, the government will unveil new market stabilization funds for investment trust firms which face huge redemptions of Daewoo-linked bonds on February 8, it said. The flurry of steps were prompted by a weekend deal under which foreign creditors agreed to take part in debt buyout plans for the ailing conglomerate. The deal marked a watershed in settling the debt crisis that engulfed Daewoo, once touted as the country's second largest conglomerate and a powerhouse of the Asian economic "miracle" of the early 1990s. It paved the way for creditors to extend fresh loans for 12 Daewoo companies placed under the government's rehabilitation program five months ago. Foreign creditors will retrieve some 39 percent of their non-guaranteed loans worth US$4.84 billion in Daewoo and three major Daewoo units, in return for giving up their right to collateral. Foreign loans to Daewoo Motor and Daewoo Electronics would be repaid at 35 percent and 67 percent for Daewoo Heavy Industry. They are required to decide by mid-March whether to accept details of debt rescheduling plans. But the two parties have yet to decide on whether to roll over Daewoo's guaranteed debt. Daewoo, one of the most high-profile victims of Asia's 1997 economic crisis, collapsed last August under some $77 billion in debts run up through years of uncontrolled borrowing and rampant expansion. It has $6.57 billion of foreign debt, including non-guaranteed debt of $4.84 billion, $1.3 billion of guaranteed debt and $430 million of other liabilities. Daewoo's liabilities prompted the government to spend billions stabilizing the turbulent financial market. But investors remain concerned that financial institutions with large exposure to Daewoo could be hit hard in February when Daewoo bonds begin maturing. (Business Day 24-Jan-2000) =============== M A L A Y S I A =============== RENONG BHD: Taking steps to raise funds to retire debts ------------------------------------------------------- In his continuing effort to restructure and revitalise the Renong group of companies, Tan Sri Halim Saad is planning to list Prolink Development Sdn Bhd on the KLSE and to divest Renong Bhd's 12.4% stake in Commerce Asset-Holding Bhd (CAHB). According to sources, these two initiatives are expected to bring in RM3.4bil in cash, which Renong will use to retire its debts. Halim Saad has come out with two latest initiatives. The listing of Prolink, which is 64% owned by Renong, is estimated to bring in RM1.5bil, while the sale of the CAHB stake will bring in RM1.9bil, based on a price of between RM11 and RM13 per CAHB share. Prolink is a property development company which has extensive land bank in Johor, and is currently developing Bandar Nusantara there. The two initiatives are the latest by Halim. Star Business reported last week that he was planning to list Time dotCom Bhd as an alternative to the restructuring proposals submitted to the government by the Corporate Debt Restructuring Committee (CDRC). This was later confirmed by Time Engineering Bhd, owner of Time dotCom, in reply to a query from the KLSE on the subject. Halim, the boss of the Renong group, is a happy and relaxed man these days compared to the difficult times he went through during the recent recession. Over the past 18 months, he has slowly but surely made substantial headway to restructure the group and clean up its books. His first priority was to clean up Renong, and that, to a large extent, has been completed with the assistance of the CDRC. A bond issue to the value of RM16bil was issued by Projek Lebuhraya Utara Selatan Bhd (PLUS) for both the debts of Renong and its associate, United Engineers (Malaysia) Bhd. But Halim plans to reduce the group's debts further by selling off its non-core assets and listing some of the companies within his stable. But he is unlikely to sell his non-core businesses at firesale prices. "I see that the group is now getting leaner and meaner. We are working very hard towards regaining our A1 rating which was accorded to the group prior to the 1997 economic crisis," Halim said, in response to queries from Star Business. Earlier he had: "If all goes well, there will be three major income sources within the Renong group--highways (mainly PLUS), telecommunications and properties." "If Halim can raise RM3.4bil from the listing of Prolink and sale of CAHB stake, Renong's RM5.4bil debt will be reduced to only RM2bil," said a source. The source added that the listing of Prolink would be a direct one and not via Kedah Cement Bhd, as speculated. "He is also selling Renong's stake in CAHB via a private placement exercise," said a source. "A debt of RM2bil is considered not too large, bearing in mind that Renong is a large corporation, and the interest payments will not be too exhausting for the group," said a source. Within the Renong group, his first clean-up target is Time Engineering Bhd. The plan is to list Time dotCom Bhd, issue new shares to creditors to reduce the company's debts, and invite a foreign party to take up a stake in Time dotCom, once the company has been listed. "The listing of Time dotCom will raise between RM1.2bil and RM1.5bil and the issuance of new shares to creditors will reduce Time's RM4.5bil debts substantially. The emergence of a foreign player after the listing exercise will bring in RM1bil to RM1.5bil, which will be used to retire more debts and used as capital expenditure to forge ahead," said the source. In the process of the clean-up job, Halim will consider offers for the sale of Crest Petroleum Bhd and Faber Group Bhd. Renong holds 38.6% stake in Crest, which recorded a pre-tax profit of RM115.74mil on the back of RM446.1mil turnover for the financial year ended Dec 31, 1998. Crest is considered to be in a non-core business and will be hived off eventually. "There are some offers, but they are very low for a company which is profitable. Only when a good offer comes by will Halim sell ... and he is willing to wait," a source said. The same goes for Faber Group in which Renong has a 60% stake. Halim will only sell at prices he thinks are justifiable to the asset value. In the meantime, the banks and creditors of Faber have accepted a proposed creditors' scheme involving the issuance of bonds and irredeemable convertible unsecured loan stocks (Iculs) for five years. Faber is hoping that during the five-year period, its properties will appreciate in value and fetch a good price. Renong's 100% owned subsidary, Projek Usahasama Transit Ringan Automatik Sdn Bhd (Putra), has also defaulted on loan payments but some negotiations are ongoing to address the issue. As for Renong's 50.1% owned Park May Bhd, it has, with the help of CDRC, entered into an agreement with Cycle & Carriage Bintang Bhd to accept a settlement proposal for its debts to its unsecured main suppliers. Prior to the 1997 economic crisis, Renong's assets were valued at RM20bil, but at the height of the crisis, the value fell to about RM4.1bil. Now, with the strong recovery, the book value of the assets as at December are worth RM8.4bil. Halim's real problem presently is Time and the creditors of Time will hopefully accept the plan that Halim has, which ensures that they will be paid every single ringgit loaned. Halim is very serious about Time, as he sees the huge potential of the Internet, which can be the money churner for the company. "Deep down in his heart, Halim has a desire to prove all his critics wrong. They had once said that he botched up Time. Given a chance, he wants to prove them wrong. He is all-out to make Time shine again, and is very enthusiastic about the Internet business," a source said. He earlier said that if the Time group was properly structured, its information highway can make more money than the North-South Expressway under PLUS. The reason why Time is opting to conduct its own restructuring is because the bidders for Time, who brokered the deal via the CDRC, are only willing to offer RM1.4bil to RM2.8bil, which is way below the value of the assets of Time. The bidders are Maxis Communications Bhd, Singapore Technologies and Kejora Harta Bhd. Besides that, Teleglobe Corp Inc and MCI Worldcom are also interested in a stake but Halim will only consider a foreign party once Time dotCom is listed so that he can get a good price for Time. Time's assets are valued at RM14.6bil (based on a 1998 book value of RM3.66bil). A local research house recently revalued Time's net asset value at RM3.04 a share in view of the potential of its Internet business. "If Halim can swing Time back into better profitability, even though the company is now making some small money, it would be a great achievement not just for him but for Time, which can be the second largest telecoms player in the country," said a source. "The turning around of Time will be good for Renong, which will regain its shine as well," he added. (Star Online 24-Jan-2000) ===================== P H I L I P P I N E S ===================== CONSOLIDATED MINES: Receiver's term extended 6 months ----------------------------------------------------- The Securities and Exchange Commission (SEC) has approved the request of Consolidated Mines Inc. (CMI) to extend the term of the rehabilitation receiver by six months from January 2000 to June 30, 2000 to enable the company to come up with a more comprehensive rehabilitation plan aimed at reviving the firm. The SEC said its approval was based on the fact that the majority of the members of the rehabilitation receiver are creditors of CMI themselves, and would be able to recover their losses on a long term basis. In its motion for extension with the SEC, CMI said the previous summary report showed the same general condition and economic status which CMI is being developed for rehabilitation. It said the company is faced by a depressed market made worse by a growing resistance from groups concerned with the environment. Thus, the receiver felt that under these conditions, it would be difficult to implement a rehabilitation plan and still expect a recovery within the timetable. CMI, thus wanted to undertake its recovery under a more favorable climate. CMI operates in the province of Marinduque where in 1996, the tailing disposal system of Marcopper Mining failed and caused a nationwide protest due to the pollution of Boac River-- a major artery and source of livelihood in the province. CMI said that until today, the situation is still negative especially with the "cleaning up" of Boac River still incomplete and full of controversy. CMI added that the economic and social conditions have not changed much during that second half of 1999 and the gloomy outlook is expected to continue this year. (The Philippine Star 23-Jan-2000) MEGA DATA: Gov't to probe Justice secretary, brother ---------------------------------------------------- The government's top graft investigator is set to probe Justice Secretary Serafin R. Cuevas in line with the award of a 4-billion Philippine peso (US$98.5 million at PhP40.607=US$1) computerized land titling project to a consortium partly owned by his younger brother. In a press conference at his office yesterday, Ombudsman Aniano A. Desierto said he will "look into" reports that Mr. Cuevas influenced the Land Registration Authority (LRA) to award its computerization project to the Mega Data consortium, in which his younger brother, Felimon R. Cuevas, has a minor stake. LRA is an agency under the Department of Justice, which Secretary Cuevas heads. But in a separate press briefing, Mr. Cuevas denied "having anything to do with the transaction." He also said his office is not "controlling the functions" of LRA. "I have nothing to do with the management of the consortium, much less with the transaction... These reports (of supposed influence peddling) have no basis whatsoever whether factual or legal," Mr. Cuevas said. He added that his brother Filemon could not have used him to bag the PhP4-billion contract considering that Felimon's Amalgamated Motors (Philippines) Inc. has a stake of less than 10% in the Mega Data consortium. Last week, losing bidders AMA consortium and the Photokina Marketing Corp. (PMC) consortium filed a complaint before the Office of the Ombudsman. They claim LRA's Prequalification, Bidding and Award Committee (PBAC) disqualified them outright during the December 9, 1999 prequalification allegedly to accommodate Mega Data. During the prequalification, PBAC reportedly refused to evaluate the bids of the AMA and PMC consortia. Also, LRA deputy administrator Ricardo F. Arandilla reportedly said the two groups were technically disqualified from the bidding. Shortly after their "technical disqualification," the AMA and PMC consortia filed a case with a Quezon City Regional Trial Court, which ordered LRA's PBAC on December 13, 1999 to open the two group's bids. The final bidding for the computerization project was held last January 10, without the AMA and PMC consortia. LRA claims it need not heed the trial court order, which it appealed to the Supreme Court last week. LRA wants the Court to nullify the trial court order, as well as declare the bidding above board. The Court is still to act on the petition. Mr. Cuevas insists he is neither an incorporator nor a stockholder of Amalgamated Motors. He admits to having been part of Amalgamated Management Corp., a family corporation which was dissolved due to bankruptcy in the 1980s. Under the law, any government official must divest his stake in private businesses to avoid possible conflict of interests. The Justice secretary also warned those who persist in linking him to the bidding mess of a possible civil suit for damages. "I reserve my right to file a case against those who tarnish my reputation... And that action has no prescription," Mr. Cuevas said. (Business World 25-Jan- 2000) PETRON CORP.: Involved in tax credit fraud PILIPINAS SHELL PETROLEUM: Involved in tax credit fraud ------------------------------------------------------- Major oil industry players Pilipinas Shell Petroleum Corporation and Petron Corp. were among the heavy buyers of fraudulently issued tax credit certificates (TCCs) from 1995 to the first half of 1998, Department of Finance (DoF) documents obtained over the weekend show. The records show Pilipinas Shell bought 917.6 million Philippine pesos ($22.6 million at PhP40.637 = $1) worth of fraudulently issued TCCs from 20 firms, mostly in the textile and garment sector. Most of these firms were part of the Chingkoe group of textile and garment companies. During the same period, Petron bought PhP679.35 million ($16.7 million) worth of fraudulently issued TCCs from 11 firms, the same documents show. In an interview with BusinessWorld, Ernesto Q. Hiansen, deputy executive director of DoF's One Stop Shop Tax Credit and Duty Drawback Center (OSS), said the transfers of the fraudulently issued TCCs were also "fraudulently represented." The OSS is a tax credit window manned by a composite team of the Bureau of Customs (BoC), Bureau of Internal Revenue (BIR), and the Board of Investments. It was formed by former President Corazon C. Aquino on Feb. 2, 1992, through Administrative Order No. 266. It was meant to provide a more efficient and speedy processing of applications for tax credit and duty drawback under the Omnibus Investments Code, Tariff and Customs Code, and National Internal Revenue Code. To date, the OSS has identified 1,430 TCCs worth PhP4.5 billion ($0.11 billion) that were fraudulently issued to 49 firms. Of the 1,430 TCCs, PhP2.8 billion ($0.069 billion) was transferred to other firms, one of which was Shell. There are two issues now which the oil firms have to answer, Mr. Hiansen said. On both counts, the OSS has documents to show that the TCCs were fraudulently obtained and that fraudulent representations were made to effect the transfer. DoF has issued orders to cancel the transferred tax credits. If the TCCs were used, the BIR and BoC will reverse the credits and collect payments. The oil companies could not be reached for comment yesterday. TCCs are issued to businesses entitled to a tax refund. The firms can then use the certificates to pay additional or future taxes. A fraudulent tax credit (or a fake claim) has no value in itself. But a TCC holder could sell his tax credits to other firms or use it to import for other firms. "The ease with which TCCs could be transferred in the past has created a lucrative secondary market which encouraged companies to file bigger tax credit claims," said Mr. Hiansen. A source at DoF said some companies bought TCCs from textile and garment firms with dubious financial standing. For instance, a company which declared PhP2 million ($0.049 million) in average sales was able to sell PhP100 million ($2.5 million) worth of TCCs. The OSS approves an application to transfer a TCC to another company on the basis of a trade relationship between the TCC holder and the transferee. This trade relationship is supported by a supply agreement between the two companies. Usually, a TCC holder transfers his tax credit to any suppliers to partly pay for inputs to produce export goods. But none of the companies to which the fraudulently issued TCCs were transferred have proven that the declared supply agreement was consummated, a DoF source said. Even if a transferee did not know that a TCC was fraudulently obtained, the fact is, the transferee told the OSS that it had an agreement to supply the TCC holder. "None of the companies with questionable TCC transfers was able to show proof that supplies were delivered. This was because payments for the TCCs were made in cash and not in goods," the source said. "The fact that a company circumvented the transfer requirement by entering into a non-existent supply contract raises questions. In that sense, can you say those firms which acquired the TCCs were free from any culpability? This is for the legal group to determine, but the facts of the case are clear," the source added. DoF sources said fraudulent TCCs sold or transferred to other firms usually had a 10% discount. Upon transfer, 20% of the discounted selling price went to the official of the company which bought the TCC; while 70% was divided between the seller of the fraudulent TCC and the OSS officials who processed the fake claims and approved the TCC. The source added that in some cases, "there may be a need to distinguish between the company and the officials in the company who may have executed these transactions on their own in connivance with the sellers of the fraudulent TCCs, and the former officials of the OSS who processed the same." The OSS has since restricted the transfer of TCCs. Any supply agreement now has to be verified first whether the volume declared in the supply agreement is not beyond the applicant's normal use. Transfers of tax credits are also audited by requiring proof that materials were supplied to the company. If not, the transfers are canceled. From 1995 to 1998, the total transfers of TCCs to oil companies alone reached almost PhP1 billion ($0.025 billion) a year. Under the new administration, total transfers shrank to PhP500 million ($12.3 million) last year, Mr. Hiansen said. (Business World 24-Jan-2000) PHILIPPINE NAT.BANK: Gov't cuts privatization target anew --------------------------------------------------------- The National Government has reduced anew its target proceeds from the full privatization of the Philippine National Bank (PNB) to 6.2 billion Philippine pesos (US$152.6 million at PhP40.637:US$1) from PhP8 billion ($196.8 million) earlier. Explaining the cut, Finance Undersecretary Joel A. Ba�ares said the Department of Finance "has decided to base PNB proceeds on its par value." He added the government wants to be "conservative" in its estimates of the semiprivate bank's sale. PNB is one of the country's largest banks with the most notorious asset problems. As of the third quarter last year, its nonperforming loans accounted for 28% of total loans, one of the highest in the industry. Its profitability is likewise dismal. As of the first half of last year, PNB recorded only PhP7.3 million ($180,000) in earnings, a mere 2.84% of its downscaled net income target for 1999 of PhP257 million ($6.3 million). At a cheaper price, Finance Secretary Jose T. Pardo last Friday said it "will not be difficult to sell the government's stake in PNB. There is already a group among the current shareholders who are interested," he told reporters last Friday. Former Finance Secretary Edgardo B. Espiritu earlier said the due diligence audit on PNB by PriceWaterhouseCoopers and Lehman Brothers "is not very encouraging." He also admitted the entry of the Tan group into PNB "may limit the number of participants to the public auction." Last year, beer and tobacco magnate Lucio Tan acquired a substantial stake in PNB, said to be equivalent to 47% to 48%, primarily through a stock rights offering. Mr. Tan was reportedly the same party who scooped up the 15.6% stake which the government forfeited when it passed the chance to subscribe to the rights offering. He is now the biggest stockholder of PNB, with four seats in the 11-man board of directors, equivalent to 35%. Of the remaining equity, the government controls 30%, foreign fund managers 18%, while the rest is held by other parties, including those acquired through the Philippine Stock Exchange. Meanwhile, PNB's board of directors has accepted the resignation of bank president and chief executive officer Benjamin P. Palma Gil, which took effect last Friday. In a disclosure to the Philippine Stock Exchange, PNB said Mr. Palma Gil will stay in its 11-man board. Taking over his post is Feliciano L. Miranda, Jr., former deputy governor for supervision and examination of the Bangko Sentral (Central Bank of the Phils.). PNB said there will be no change in the composition of the bank's board of directors. This is "to ensure continuity and assist in the disposition of the remaining 30% National Government stake in PNB," it said in a statement. "I will remain in the board in order to provide a smooth transition for the new majority stockholder arising from the final privatization of the bank," Mr. Palma Gil said in the statement. "President Joseph Estrada's administration is committed to sell the remaining shares of the government in the bank and I have agreed to help until his task has been completed," he added. Mr. Miranda was elected to the PNB board after the entry of taipan Lucio Tan into the bank last year. Mr. Tan now has close to 50% stake in the listed bank. Mr. Miranda was said to have been recommended by Bangko Sentral senior adviser Gabriel Singson, who also headed PNB before becoming central bank governor. His appointment to the PNB post drew positive reactions from stock market analysts, who described it as possibly "a stopgap measure" for the bank. "It's the best thing (PNB's controlling shareholders) can do at this point," a research head from a foreign brokerage house said. While there are other candidates considered as "more savvy" bankers, most "brand-name" CEOs are already associated with "one interest or another," referring to beer and tobacco magnate Lucio Tan or other government officials. The analyst said Mr. Miranda was a "neutral candidate," with a strong track record as a bank regulator. This, he said, would serve the bank well, at least until majority control is established after its full privatization later this year. "He is probably an acceptable 'stopgap' measure until Mr. Tan can install a stauncher ally," he said. The research head warned, however, that Mr. Miranda is unlikely to institute a major cleanup of the bank's books, reputed to be one of the industry's worst. "As long as the government is still involved, political pressure will be present," he said. "There can be no cleanup because of this." Another banking analyst said PNB's changing of the guard is insufficient to change the market's perception of the bank. "There will be no re-rating (of brokers' investment advisories)," he said. "This has nothing to do with the bank's fundamentals." Most research groups rate PNB as a "sell" or "hold," owing to its asset and valuation problems as well as uncertainties associated with its post-privatization prospects. The research head said it was inconceivable that any investor -- including Mr. Tan -- will be interested in PNB given its sordid financial state. "It might be possible that they will get the government to take out PNB's bad loans before total privatization to entice more investors like they did in the past," he said. (Business World 24-Jan-2000) PHILIPPINE NAT.BANK: Stock analysts say hold or avoid ----------------------------------------------------- "To those already holding the shares of PNB, we would not recommend a sell because it is already trading below par. You hold on to your shares because it is undervalued. But if you are not yet in, we would recommend you avoid PNB since the fundamentals of the company do not merit it shares to go up at least in the near future." That's the way one economist responded when asked what he could recommend to investors about Philippine National Bank. With all the controversies surrounding BW Resources Corp., the market has now become wary from holding on to stocks whose controlling interests have close links with Malaca�ang. Another company that investors seem to be shying away, at this time, is the Philippine National Bank (PNB). A close friend and said to be one of the biggest election campaign contributors of President Joseph Estrada, Lucio Tan is now reported to hold nearly 50% of PNB's outstanding shares. Intent on merging PNB with his Allied Banking Corp., the Chinese-Filipino tycoon has openly expressed keen interest in buying the government's remaining 30% stake in the bank. Mr. Tan needs at least 67% of the PNB shareholders' vote to enable him to merge it with Allied Bank. The government, for its part, will sell its 30% interest to fully privatize the bank before June this year. This, the government said, is part of commitments to the World Bank and International Monetary Fund to reform the domestic banking sector. With another close friend of President Estrada involved in these developments, the market tends to shun touching PNB these days. This is one of the stocks that is somehow tainted by worries of cronyism. These, what we call 'crony stocks,' are a turnoff to investors for now," said an economist at a local security firm who asked not to be named. Even the World Bank is reported to have expressed concern over the entry of tobacco and beer magnate Lucio Tan into PNB. BusinessWorld earlier reported that the World Bank is likely to delay the release of a $100-million loan for the government's banking sector reform program due to this concern. Apart from this, there are talks that Mr. Tan himself is selling PNB shares into the market to depress its price. "They are depressing the price of PNB because once the government pushes for privatization of the bank, they will be able to buy it at a lower price," the economist said. Last Friday, PNB's share price closed at 95 Philippine pesos (PhP), below its PhP100 par value. In addition to this, the financials of the bank is on a shaky ground. PNB's non-performing loans, as of the third quarter last year, stood at 28% of total loans, one of the highest in the industry. The economist said some of these loans are behest loans that are under investigation. "So even at PhP90, which looks very cheap, some investors wouldn't even dare touch the stock," he said. PNB incurred a net loss of PhP7.25 billion (US$178.4 million at PhP40.637:US$1) in 1998. According to Barra Global Estimate's consensus forecast among security firms, the bank's net loss is expected reach PhP190 million ($4.7 million) in 1999. This year, its losses are expected to hit PhP501 million ($12.3 million). (Business World 25-Jan- 2000) ================= S I N G A P O R E ================= NEPTUNE ORIENT LINES: S&P gives credit "junk" status OSPREY MARITIME: S&P gives credit "junk" status SAMUDERA SHIPPING: S&P gives credit "junk" status ---------------------------------------------------- Three Singapore shipping lines have been given "junk" status in their credit ratings by Standard and Poor's while two Thai and one Indonesian firm were deemed the worst, it was reported on Friday. In S & P's first regional survey of the shipping industry, the ratings agency gave the "junk" designation to Neptune Orient Lines (NOL), Osprey Maritime and Samudera Shipping Line, putting them alongside seven others for which S & P prsented a bleak picture. All were victims of excess capacity, failing freight rates, rising bunker costs and over-leveraged balance sheets,S & P said. Attempts by some to refinance their loans had been hampered by weak banking institutions reluctant to help out, a problem S & P said was particularly acute for Thai and Indonesia frims. "Earnings vulnerability and aggressive capital structures, characterized by modest and volative cash flows and high debt levels, have strained the ability of many companies to meet financial obligations in a timely manner," said shipping analyst Tan Ee-Lin. Because of the regional economic crisis, the ratings of most Asian shipping companies had suffered, being "weak to vulnerable" from "fair to weak," Tan said. The three whose credit ratings were deemed the worst were Thailand's Precious Shipping Public Co. and Thoresen Thai Agencies Public Co. as well as Indonesia's PT Berlian Laju Tanker. Tan said she did not expect the outlook to improve significantly "as there is still huge over-capacity." NOL is seeking to build up its logistics business after the collapse of container freight rates was a major factor in the national shipping line's record net loss in 1998. Singapore's national shipping line returned to the black with an interim net profit of S$10 million for the first half of 1999 but the performance was boosted by a $177 million gain in non- recurring items due to a profit from the sale of its stack- train business. (The Philippine Star 23-Jan-2000) =============== T H A I L A N D =============== BANGKOK BANK: Fitch keeping eye on rating BANK OF ASIA: Fitch keeping eye on rating BANK OF AYUDHYA: Fitch keeping eye on rating DBS THAI DANU BANK: Fitch keeping eye on rating SIAM COMMERCIAL BANK: Fitch keeping eye on rating THAI MILITARY BANK: Fitch keeping eye on rating ------------------------------------------------- Thai Farmers Bank stands out as leading Thai banks back to recovery and appears best placed to restore profitability in 2000, according to a report released by London-based rating agency Fitch IBCA. In contrast, Bank of Ayudhya and Thai Military Bank remain vulnerable to further substantial losses and will need to increase reserves and capital significantly over the next 12 months, says the agency. Both banks have provisioning levels "significantly below" their peers -- 10 per cent of gross loans, as opposed to 20 per cent. The agency's comments came shortly after Thai banks had reported their 1999 financial results with most of them recording losses due to provisioning against loan losses. Alongside TFB, Fitch noted that Bank of Asia, DBS Thai Danu Bank, Bangkok Bank and Siam Commercial Bank, had the highest level of loan-loss reserves and appeared on track to restore underlying profitability this year. It said that if Siam Bank provisioned at the level of its major peers, it would need to set aside an additional Bt22 billion. The agency added that by Bangkok Bank's own estimates it needed to make Bt26 billion of provisions in 2000. Improved earnings performance would lower the required additional capital raising for both banks. According to the report, Krung Thai Bank's operating performance in 2000 remained difficult, with much depending on the terms of loss sharing and yield-maintenance agreements relating to the absorption of First Bangkok City Bank's assets and liabilities as well as government assistance to deal with its own bad loans. The agency said both Ayudhya and Thai Military Bank were expected to make additional provisions above their current estimates of Bt32 billion and Bt25 billion, respectively. "Bank of Ayudhya has not yet announced any further capital raising plans and has indicated that, contrary to the agency's projections, its capital adequacy is sufficient to meet expected loan losses," the report noted. In terms of asset quality, Fitch expects TFB and SCB to report the greatest progress in cleaning up their balance sheets due to a higher level of debt restructuring, write- offs and also, in the case of TFB, transfers and write-offs to its two asset-management companies. Meanwhile, the agency expects average retail funding costs for the eight non-intervened banks to decline from 4.2 per cent in 1999 to about 3 per cent in 2000. Average yields on performing loans are likely to fall from 9 per cent to about 8 per cent in 2000. "However, the need to prevent further delinquencies as well as competition for good borrowers is likely to continue to place pressure on these margins," it noted. With the level of debt restructuring now picking up, the agency said that yields on restructured loans are expected to drop. It expects an average of 3-4 per cent in 2000. "The main risks to this improved operating environment are greater competition, a less accommodating regulatory stance and a significant risk from US interest rates that flow through to domestic rates," Fitch said. (The Nation 25- Jan-2000) BANK THAI: Closes 42 branches in streamlining drive --------------------------------------------------- It was a blue Monday for BankThai (BT) staff yesterday when the nationalised bank announced that it was closing down 42 unprofitable branches and laying off around 350 employees. The bank added that further closures could occur depending on the country's economic situation and the bank's future operations. BT president Phirasilp Subhapholsiri said in a statement that the cost-cutting plan was aimed at improving the bank's operating efficiency, sharpening its market competitiveness and pursuing its plan to become a wholesale banking institution. According to a filing to the Stock Exchange of Thailand signed by BT executive vice president Nopwong Ramakomut, the branches set to close were those located in areas that have limited economic potential for the development of wholesale banking business. In addition, any branches that had a history of low transaction volume and failed to meet the Bank of Thailand's loan-volume requirements would also be closed down. A breakdown of the branches facing the axe reveals that six are located in Khon Kean, seven in Nakorn Ratchasima, five in Chon Buri, six in Chiang Mai, seven in Nakorn Sawan, five in Petchburi and six in Songkla. However, BT said that it also planned to open new branches in locations where there were promising factors for developing wholesale banking business. Currently, the bank has identified four such locations, all of which are upcountry. More locations may be added in the future. BT added that it would offer employees laid off from closed branches an opportunity to continuing working for the bank at either its head office or branches requiring additional manpower as they upgraded. Compensation packages would be offered to any employees not wishing to relocate to other branches. However, details of the packages were not made available. Despite reducing its staff, the bank is planning to upgrade its remaining branches to handle a greater volume of customers while offering a wider range of products and services related to wholesale banking. "Many of the smaller branches will be upgraded to become full service branches, and some of the larger branches will be converted into regional offices," the bank statement added. The bank is also bracing for the negative impact of the branch closures. The deposit accounts of the 42 branches set for closure, totalling Bt12 billion, represents 6.18 per cent of the bank's total deposits. However, BT hoped that only a small number of deposit accounts would be closed by customers at these branches, as they opted to transfer their money to other branches in the region. To prevent an exodus of customers to other banks, BT is transferring all loan accounts, worth Bt3.9 billion, at the 42 branches to its nearest operating branches. (The Nation 25-Jan-2000) KRUNG THAI BANK: Seeks B350m to offset losses --------------------------------------------- The Bank of Thailand says it needs at least 350 billion baht to offset losses incurred by the Financial Institutions Development Fund during the economic crisis. M.R. Chatumongol Sonakul, central bank governor, sent a letter to the Finance Ministry last week reporting that total liabilities of the fund now stood at 1.4 trillion baht. This excluded 185 billion baht injected into Krung Thai Bank, as regulators believe this will eventually be recovered once the state privatises its stake in the state- owned bank. Losses to the development fund have jumped higher than expected, partly due to the poor results posted by asset auctions held by the Financial Sector Restructuring Authority. The restructuring authority sold assets of the 56 closed finance companies at an average of 14% of book value, compared with previous estimates of 42%, officials said. Intervention in other ailing finance companies and banks cost the Financial Institutions Development Fund another 200 billion baht. The government approved the issue of 500 billion baht in bonds in 1998 to help refinance liabilities incurred by the fund. Interest payments for the debt, totalling 35 billion baht last year, will be paid through the state budget, with principal repaid through proceeds from state enterprise privatisation and future profits of the Bank of Thailand. Under the law, the Finance Ministry is responsible for offsetting losses incurred by the development fund. Officials say losses would probably be first repaid to creditors of the restructuring authority, who are owed a total of at least 150 million baht. Finance Minister Tarrin Nimmanahaeminda has asked ministry officials to study how the shortfall should be covered, with the most obvious solution being a new bond issue. But this could be politically difficult, as any new issue would have to be cleared by parliament. Increasing state debt would also have a significant impact on the country's budget position. (Bangkok Post 24-Jan-2000) ONPA INTERNATIONAL PLC: To keep to debt plan -------------------------------------------- Onpa International Plc said the company would continue with its debt-restructuring plan despite the insider-trading charges filed by the Securities and Exchange Commission (SEC) against three of its executives, adding that new partners were expected to arrive in March this year. A company source said Viroj Preechawongwaikul, Supaporn Preechawongwaikul and Sawang Preechawongwaikul -- accused by the SEC of using their positions to benefit from inside information relating to the sale of shares in Onpa between Feb 3 and 27, 1998 -- had resigned from the company last month. Nongnut Preechawongwaikul has since replaced her father Viroj as the company's managing director. Onpa had reported to the Stock Exchange of Thailand that Broadcasting Network Thailand Ltd would acquire a 23 per cent stake in the company under its debt-restructuring programme. According to the source, Onpa is continuing its negotiations with several global entertainment companies, including Sony music and Polygram, who also want a stake in the Thai company. (The Nation 24-Jan-2000) THAI TEL.AND TEL.: Creditors to vote on debt plan ------------------------------------------------- Creditors of the provincial fixed-line operator, Thai Telephone and Telecommunication Plc (TT&T), will vote for the first time on Feb 18 to approve the company's latest debt-restructuring plan, an executive of the company said. TT&T is the last telecoms company which has yet to complete its Bt38 billion debt-rescheduling process, due mainly to disagreement among its creditors and shareholders on the terms and conditions. The debt-restructuring talks broke down last year but company executives said that the company is close to clinching a deal with the lenders this year. According to its latest debt-restructuring plan, the company proposed three options to its creditors who are due to vote to accept or reject them on Feb 18. The negotiations are being carried out under the framework of the Corporate Debt Restructuring Advisory Committee. The voting date has been postponed from the middle of last December. US-based Kensington Group has replaced Chase Manhattan Bank as TT&T's financial adviser on the debt-restructuring deal, the executive said. The executive said that the first option is the conversion of some debt to equity, while the second proposal is a request for the debt to be rescheduled. "I think that the subordinate creditors prefer to convert the debt to equity," the executive said. Subordinate creditors are those who are both lenders and shareholders of TT&T. Among them are Jasmine International Plc, Loxley, Italian-Thai Development Plc, Nippon Telegraph and Telephone Corporation (NTT) and Phatra Thanakit Plc. TT&T owes the group a total of Bt5 billion. The remaining creditors holding secured and unsecured bonds are reported to favour allowing the debt repayment period being extended. If they agree to the debt extension option, the creditors will have to change the current interest rate on the loans of 5 per cent to the floating rate. Regarding the third option, this requires TT&T to re-capitalise and look for a partner. The company said it would need time to find a suitable partner and re-capitalise if this option is taken. However the executive declined to elaborate on the details. He said that the terms could be changed later depending on the creditors' final resolution. An analyst said that all three options are likely to be acceptable to the creditors who will enjoy a win-win situation. "It is better that dragging the process on and finally pushing the case to the bankruptcy court," the analyst said. If there is no consensus on the first vote, then the second vote will be held on March 1. If there is still no final agreement the case will then go to the court. Earlier the creditors said that they wanted the company to finish the telecom concession conversion process before they would enter discussions about the debt. But the creditors changed their mind and initiated the negotiations with TT&T because the Cabinet has not yet approved the conversion framework. The conversion will allow the telecom concessionaires to stop paying a share of their revenue to the state agencies who will be compensated by the concessionaires in return. The amount of compensation will be based on the revenue- sharing payments, which will be calculated from the start of last year to the end of their concession periods. The analyst said that after the end of the debt-restructuring process, the situation of the debt-ridden telecoms company will improve rapidly in tandem with the rebounding economy. Last year TT&T saw its number of subscribers increase by 45,000, up from 27,000 in 1998. To date it has 1.2 million subscribers, compared to its total 1.5 million lines. However, its average revenue per line dropped to Bt502 in the same period compared to Bt508 in 1998. The growth rate of TT&T's subscribers is lower than that of metropolitan fixed-line operator, TelecomAsia Corporation Plc (TA), which had 98,000 new subscribers for last year, up from 15,000 in 1998. TA has a total of 1.3 million fixed-line subscribers with average revenue of Bt624 per line. down from Bt643 in 1998. (The Nation 24-Jan-2000) S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter -- Asia Pacific is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Darryl Henning, Managing Editor, Feliz Ordona and Cristina Pernites, Editors. Copyright 2000. All rights reserved. ISSN: 1520-9482. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR -- Asia Pacific subscription rate is $575 for 6 months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. 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