/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/000217.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 Thursday, February 17, 2000, Vol. 3, No. 34 Headlines * C H I N A & H O N G K O N G * CHINADOTCOM: Posts wider annual loss DATSUN COURT SAUNA HOUSE: Facing winding up petition THOUSAND DRAGON DEVELOPMENT: Facing winding up petition WAH LEE RESOURCES HLDGS.: Reports share fluctuation to HKSE * I N D O N E S I A * PERUSAHAAN LISTRIK NEGARA: Expects to post 9-month loss PT BUNAS FINACE INDONESIA: Reports to JSX PT LIPPO KARAWACI: Offers asset-to-equity swap PT PUTRA SURYA MULTIDANA: JSX updated on bankruptcy * J A P A N * L. KAKUEI CORP.: Files for bankruptcy MICROSOFT JAPAN: Under fire like U.S. parent NAGASAKIYA: LTCB may ask Gov't to cover loan NAGASAKIYA: Stock exchanges to delist NAKANO CORP.: Shares hit low point NIPPON CONLUX CO.: Expects to post annual loss NIPPON CREDIT BANK: Softbank consortium lead bidder NIPPON SHINPAN CO.: To cease real estate biz, post loss NISSAN MOTOR: Stock hits 13-month low SUMITOMO METAL INDUSTRIES: Net loss triggers exec paycut * K O R E A * DAEWOO MOTOR: Bid invitations go out * P H I L I P P I N E S * GERRY COMMERCIAL: Sugar trader faces perjury raps INT'L CONTAINER TERMINAL SVCS.: To hold port-pullout talks NATIONAL STEEL CORP.: European group in buyout final stages NEW FRONTIER SUGAR CORP.: Sugar trader faces perjury raps SHEMBERG GROUP: Creditors OK debt relief SOUTH PACIFIC SUGAR CORP.: Sugar trader faces perjury raps UNIWIDE GROUP: Asking for 50% debt repayment discount UNIWIDE SALES WAREHOUSE CLUB: French retailer signs MOU * T H A I L A N D * SIAM CEMENT: Reports Baht 4.7B loss SIAM CEMENT PLC: Unloads Bt35B in holdings THAI PETROCHEMICAL INDUS.: Creditors ask court for control THAI PETROCHEMICAL INDUS.: Bankruptcy court delays decision THAI PETROCHEMICAL INDUS.: Challenges creditors THONBURI AUTOMOTIVE ASSEMBLY PLANT: Debt reform ahead ============================== C H I N A & H O N G K O N G ============================== CHINADOTCOM: Posts wider annual loss ------------------------------------ Chinadotcom's net loss last year more than doubled from 1998 to US$18.7M, despite a more than five-fold leap in revenue to $20.1M. In the final quarter of last year, the net loss widened more than five times from 1998 to $13M, as revenue more than doubled to $10.8M. Chief financial officer Peter Hamilton said fast expansion in a bid to tap market share in the region resulted in an operating loss of $19.7M in the fourth quarter. A full year figure was not available. DATSUN COURT SAUNA HOUSE: Facing winding up petition ---------------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing for March 22 on the petition of Kong Wai Fu for the winding up of Datsun Court Sauna House Limited. A notice of legal appearance must be filed on or before March 21. THOUSAND DRAGON DEVELOPMENT: Facing winding up petition ------------------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing for March 15 on the petition of Sin Ping for the winding up of Thousand Dragon Development Limited. A notice of legal appearance must be filed on or before March 14. WAH LEE RESOURCES HLDGS.: Reports share fluctuation to HKSE ----------------------------------------------------------- The Directors of the Wah Lee Resources Holdings Limited (incorporated in Bermuda with limited liability), through Yeung Kwok Fan, Chairman and Managing Director, have noted the recent increase in the price and trading volume of the shares of the Company and wish to state that other than the matter set out below they are not aware of any reasons for such increase. The Directors announce that they are informed by Lucky Bingo, a substantial shareholder of the Company holding approximately 33.01 per cent. of the issued share capital of the Company, that it has commenced preliminary negotiation with an independent third party not connected with the Company, its directors, chief executives or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates (as defined in the Listing Rules) for the disposal of shares held by it in the Company. The Disposal may or may not proceed and no binding agreement in relation to the Disposal has been made between the parties. In particular, details of the Disposal, including timing of the disposal, the number of the shares to be disposed and the consideration, has not been discussed. At this moment, the Directors do not have any idea of when the negotiation will be materialised or if new Directors are to be appointed to the board of directors of the Company. The Directors also confirm that save for the Disposal, there are no negotiations or agreements relating to intended acquisitions or realisations which are discloseable under paragraph 3 of the Listing Agreement, neither are the Directors aware of any matter discloseable under the general obligation imposed by paragraph 2 of the Listing Agreement, which is or may be price-sensitive nature. If the Company should enter into any agreement which constitutes notifiable transaction under the applicable provisions of the Listing Rules, an announcement will be made. The Directors refer to the announcements of the Company dated 21 September 1999 and 30 November 1999 regarding the restructuring of the indebtedness of the Group and wish to state that the Company is still in the progress of negotiations with the bankers and financial institutions of the Group. The Company will keep the public informed on the progress of the debt restructuring. In the meantime, public investors are urged to exercise extreme caution in dealing in the shares and warrants of the Company. (Hong Kong Stock Exchange 16-Feb-2000) ================= I N D O N E S I A ================= PERUSAHAAN LISTRIK NEGARA: Expects to post 9-month loss ------------------------------------------------------- Perusahaan Listrik Negara, Indonesia's state-owned power company, expects to lose 4.04 trillion rupiah in the April- December period, even after a sharp increase in electricity prices. The loss would have been 7.9 trillion rupiah without the 29.3% electricity price increase, said Mines and Energy Minister Susilo Yudhoyono. PT BUNAS FINACE INDONESIA: Reports to JSX ----------------------------------------- PT Bunas Finance Indonesia Tbk, through Yose Rizal Bambang Aribowo, Head of Listing Division Pjs. Head of Trading Division, reports to the Jakarta Stock Exchange on a recent bondholder meeting conducted 10 February 2000. 1. Approved and accepted clarification/responsibility of company regarding default of payment of Interest Coupon Bond No.5. 2. Did not approve plan of the company's debt restructuring. 3. Approved to give power to the trustee agent regarding steps which should be executed related with result of General Bondholder Meeting. 4. Did not approve the write-off the company's financial ratio as determined in the Trustee Agreement. For the third meeting agenda in the General Bondholder Meeting regarding approval proposal to the change of agreements related with Bond Emission, and give power to the trustee/bondholder appointed to discuss the Company's Debt Restructuring with Informal Steering Committee and Company, can not be executed because the plan proposal of debt restructuring was not approved by majority bondholders (Jakarta Stock Exchange 15-Feb-2000) PT LIPPO KARAWACI: Offers asset-to-equity swap ---------------------------------------------- PT Lippo Karawaci (JSX:LPKR), property subsidiary of the Lippo Group, said it is offering asset to equity swap or sell part of its assets in its attempt to restructure its debts. Company executive Hendra Sidin said LPKR had US$ 40 million in foreign debts and that some of the debts were overdue. The company also has Rp200 billion (US$ 28.5 million) in debt to Bank Danamon and Rp28 billion to other domestic banks that is also overdue. Hendra said his company had not succeeded in reaching an agreement with its foreign creditors on its proposed restructure, but it had signed a letter of commitment on its domestic debts with the Indonesian Bank Restructuring Agency (IBRA) that was now in control of Bank Danamon and its other creditor banks. (Asia Pulse 14-Feb-2000) PT PUTRA SURYA MULTIDANA: JSX updated on bankruptcy --------------------------------------------------- Appointing to the hearing was conducted between Jakarta Stock Exchange, Kantor Kurator dan Pengurus Indonesia Lucas, SH,CN through letter No. 132/KP-L/PSM/II/200 dated 09 February 2000 regarding Update the first verification meeting of PT Putra Surya Multidana Tbk, informs the progress of bankruptcy of PT Putra Surya Multidana Tbk especially regarding debt-credit verification meeting conducted on 4 February 2000. In the meeting, there was no approval regarding credit- debit between creditors and Curator, therefore the extended verification meeting will be executed on 14 February 2000. The further progress of the extended meeting will be reported to the Jakarta Stock Exchange. Kantor Kurator dan Pengurus Indonesia Lucas, SH, CN released the announcement as per attached. (Jakarta Stock Exchange 15-Feb-2000) ========= J A P A N ========= L. KAKUEI CORP.: Files for bankruptcy ------------------------------------- A mid-sized property developer affiliated with the collapsed Long-Term Credit Bank of Japan (LTCB) went under Tuesday with debts of 135.1 billion yen (1.3 billion dollars). L Kakuei Corp., which develops suburban condominium complexes, lodged an application for bankruptcy with the Tokyo District Court. "The company filed for bankruptcy today and we accepted it," said a spokesman for the court who declined to be named. L Kakuei becomes Japan's biggest construction failure this year, after proving unable to clear the large debts dating from Japan's "bubble economy" investment boom of a decade ago. "Also it was due to the collapse of LTCB," said Shirou Abe of private research agency Teikoku Databank, which monitors corporate failures in Japan. LTCB, L Kakuei's main creditor, collapsed in October 1998 under the weight of massive bad loans dating back to the bubble economy. Last Wednesday, it concluded a deal with a syndicate led by Ripplewood Holdings of the US on the first outright sale of a Japanese bank to foreigners. L Kakuei was founded in 1949 and employs 117 people. Its financial standing deteriorated sharply after LTCB's collapse and in the year to last March, it reported a net loss of 1.83 billion yen. The Tokyo Stock Exchange said it would delist the firm from its first section in May. Trading in L Kakuei shares was suspended on Tuesday. They ended Monday down two yen, 3.4 percent, at 58 yen. Teikoku Databank said in a report on Tuesday that the number of Japanese firms going bankrupt in January jumped 43.7 percent from a year earlier to 1,441, with smaller companies particularly hard hit. It was the third month in a row that the number of failures has gone up year-on-year. "Bankruptcies appear to be increasing sharply again as a number of small- and mid-sized firms are exposed to severe conditions by their banks and business partners," the agency said. (Agence France Presse 15-Feb-2000) MICROSOFT JAPAN: Under fire like U.S. parent -------------------------------------------- The U.S. Justice Department's antirust suit against Microsoft is a hotly disputed topic that world over, with many accusing the federal government of regulatory overreach. Less well known is that the Japan Fair Trade Commission has also challenged Microsoft Japan, a wholly owned subsidiary of U.S. Microsoft, under the Japanese Antritrust Law. Though the Japanese case has been resolved without litigation, on close examination the criticisms of Microsoft are no more warranted in Japan than in the U.S. In November, `1998, Japans' FTC called on Microsoft Japan to consider whether its practices were illegal under the Antimonopoly law. The agency suspected that Microsoft Japan forced personal computer manufactures to accept a contract by which Microsoft Japan licensed the shipping of its spreadsheet software Excel only when the Japanese version of its word-processing software, Word, was licensed with it. At the time Excel was the top selling spreadsheet software program in Japan, but Microsoft Word lagged behind other programs in the Japanese word-processing software market. Likewise, Microsoft Japan was accused of forcing PC manufactures to accept a similar contract for the email program Outlook, which lagged behind other email programs with schedule-managing functions. Through these practices, the government alleges, Word and Outlook became the top software programs in their respective markets, in terms of market share. These practices were alleged to be the result of unreasonable tying arrangements, and thus illegal under Article 19 of Japan's Antimonopoly Law. As a remedy, the Japanese FTC proposed that Microsoft Japan cease the above practices, accept PC manufacturers' applications for licenses for Excel only, and refrain from the above practices in the future. This case ended the following month because Microsoft Japan accepted this recommendation by Japan's FTC. In addition, Microsoft stated that it welcomed the agency's approach: At the very same time, Microsoft was being attacked in the U.S. through much harsher litigation. When the Japanese FTC issues a "warning," it is an indication that the agency suspects illegal practices but is not completely sure of its case; a "recommendation," in contrast, is declaration that some practices are certainly illegal. For Microsoft, then it was a relief that Japan's FTC issued a warning rather than recommendation. After all, Microsoft Japan was being charged with practices very similar to those for which Microsoft was taken to court in the U.S. However, we cannot and should not think that the Japanese FTC administers its Antimonopoly Law generously. The reason the agency issued a warning rather than a recommendation was that the distributional share of the overall market held by Microsoft Japan was, in contrast with the U.S. market, very small. For example, the Internet service providers that were presumably forced to exclude browsers other than Microsoft Japan's had less than 10% of the total volume of Japanese browsers. It is doubtful whether the U.S. Department of Justice would have challenged Microsoft if the situation had been the same as in the Japanese case. Of course, it is understandable that Microsoft said it welcomed the Japanese FTC warning, since Microsoft hoped that a lenient Japanese settlement would provide a model for the U.S. But what about the economics of the claims themselves? Is a "tying agreement" harmful to consumer and to market competition? Prior to this case, the Japanese FTC had judged a tying arrangement to be wrong solely because it led to "coercing victim to purchase tied items," In its Microsoft case, however, the agency slightly amended its claims to say that the practice led to "establishing entry barriers and excluding competitors." Hence, the Japanese standard is now fairly close to the U.S. standard is now fairly close to the U.S. Standard established in the 1984 antitrust case, Jefferson Parish Hospital District No. 2 vs. Hyde. It is impossible for any merchant to be perfectly satisfied with a contract's conditions. It can always claim to have been "coerced," provided we use a very loose definition of that term. So the new legal standard of "anticompetitiveness: is actually less dangerous to market freedom than the former one. At least now there is additional tying arrangement has harmed someone besides the contracting merchant. And yet, even in this case, there are reasons to question the regulators' logic. It is perfectly normal for firms to seek contract conditions that are the most advantageous for themselves. This suggest nothing more than that the firm is defending itself against pressure from competitors, which is precisely what Microsoft was doing in Japan. If this type of decision making itself were made illegal under antimonopoly law, all strategic marketing would be illegal under under antimonopoly law. To declare strategic decision making suspicious or illegal is equivalent to denying the merit of the market economy itself. It is very difficult, if not impossible, for a federal agency - whether it be in Japan or the U.S. - to distinguish the behavior of a supposed monopolist from that of market rivalry itself. The Japanese FTC has not yet recognized the important of this argument, and neither the importance of this argument, and neither have Japanese courts. But as the economy becomes ever more internationally integrated, technologically innovative and strategically competitive, it becomes increasingly clear that antitrust law itself violates the basic principles of a truly competitive market economy. (The Asian Wall Street Journal 14-Feb-2000) NAGASAKIYA: LTCB may ask Gov't to cover loan -------------------------------------------- Long-Term Credit Bank of Japan, which is to be transferred to a consortium led by Ripplewood Holdings LLC of the U.S., may ask the government to purchase its 18 billion yen loan to Nagasakiya Co. (8262), sources close to the matter said. Retail chain operator Nagasakiya effectively went bankrupt on Sunday. The contract transferring the bank to the consortium contains the provision that if loans extended by LTCB fall in value by 20% or more, the new LTCB can call on the state-run Deposit Insurance Corp. to purchase them at book value. The bank plans to write off all of the 18 billion yen loan in the current fiscal year. Most of the amount is covered by loan-loss reserves and loan collateral. But the value of the loan could drop more than 20% if the value of property backing it plunges sharply, the sources said. Because the restructuring plan for Nagasakiya will take a long time to work out, the bank's purchase request would not be made for another 18-24 months, if at all, according to the sources. The amount payable at that stage would also be much lower than 18 billion yen. (Nikkei 15-Feb-2000) NAGASAKIYA: Stock exchanges to delist ------------------------------------- The Tokyo, Osaka and Sapporo stock exchanges will delist the shares of Nagasakiya Co. (8262) on May 14, exchange officials announced Monday. The company was granted court protection from creditors under the Corporate Rehabilitation Law on Sunday. The exchanges today placed the stock of the embattled supermarket operator in the liquidation post category, which allows limited trading in the issue until May 13. At the same time, Japan Securities Finance Co. (8511) has removed Nagasakiya from the list of issues tradable on margin. In Monday's morning session on the Tokyo Stock Exchange, Nagasakiya shares drew a flood of sell orders, remaining asked-only at 47 yen, below its face value, with no stock changing hands. Nagasakiya announced on Feb. 7 that it expected liabilities to exceed assets for the fiscal year through Feb. 29. Over the three days following the announcement, the company stock price fell by 40%. (Nikkei 14-Feb-2000) NAKANO CORP.: Shares hit low point ---------------------------------- Shares of Nakano Corp. (1827) have been sinking since last summer. They fell to a year-to-date low of 89 yen on Tuesday, and sell orders have continued to emerge from the unwinding of corporate cross-holdings. The building contractor expects a net loss of 11 billion yen for the fiscal year ending March 31, compared with the initially projected 1.1 billion yen. Extraordinary losses are estimated to total 11 billion yen, with much of this relating to assistance to a financial subsidiary. The parent will forgive about 4-5 billion yen of loans to that unit. Beginning next fiscal year, companies will be required to mark down the value of property held as inventory that has fallen to less than half its original value. Nakano, which will adopt the lower of cost or market value method, is expected to record losses in excess of 1 billion yen this fiscal year. It will also book a loss of nearly 3 billion yen on the disposal of property owned by its U.S. subsidiary. With this, the firm hopes to finish disposing of losses incurred during the bubble period. While the market looks favorably on the improvement in Nakano's balance sheet, many observers are focusing on how it handles the worsening environment for condominium orders. (Nikkei 16-Feb-2000) NIPPON CONLUX CO.: Expects to post annual loss ---------------------------------------------- Nippon Conlux Co (TSE:6970) expects to record a consolidated net loss of 400 million yen (US$ 3.7 million) for the year to March, pushing the firm into the red, against an earlier projection of 850 million yen in group net profit, the company said on Thursday. The manufacturer of coin mechanisms for vending machines posted group net profit of 800 million yen a year earlier. Sales are expected to decline 12 per cent as vending machine makers have been reluctant to buy the existing coin selection system ahead of the issue of new 500-yen coins, company officials said. The firm will post an extraordinary loss of three billion yen on the sale of securities holdings and reserves set aside to cover loan losses. Consolidated pretax profit is expected to fall 27 per cent to 2.2 billion yen. For the year to March 2001, the company forecasts earnings recovery thanks to expected demand for mechanisms able to handle the new 500-yen coins. A stronger financial position following the recording of an extraordinary loss this fiscal year will also bolster the bottom line next year, the officials said. The firm's stock was favored by investors last autumn following the government's October announcement of a plan to issue 2,000-yen notes this summer. The stock price, which had hovered around 600 yen until Oct 5, shot up briefly to 766 yen. The issue closed on Thursday at 575 yen. (Asia Pulse 14-Feb-2000) NIPPON CREDIT BANK: Softbank consortium lead bidder --------------------------------------------------- A Japanese consortium led by Internet investor Softbank will win the two-horse race to take over the failed Nippon Credit Bank (NCB), a leading business daily said yesterday. The Financial Reconstruction Commission will formalize the decision by the end of this month, leaving US investment group Cerberus out in the cold, the Nihon Keizai Shimbun said. The Softbank group, which includes leasing firm Orix and Tokio Marine and Fire Insurance, had been selected by the commission because Cerberus "failed to find key supporters in Japan," it said. But Financial Reconstruction Commission spokesman Masahiro Hasegawa downplayed the report. "There is nothing concrete. We have so far chosen two candidates, including the Japanese consortium led by Softbank," he said. "But we need several more discussions with each candidate. We still don't know when we can reach a final decision." The newspaper said the Softbank consortium would pay up to 10 billion yen (US$92 million) to acquire all the outstanding shares of NCB, which is under temporary state control after failing in December 1998. The group will also inject about 100 billion yen into the bank, while the government will provide more than 200 billion yen in public funds through a purchase of preferred shares in NCB, the daily said. NCB, one of Japan's three long-term credit banks, collapsed under a mountain of bad loans dating back to the "bubble economy" investment boom of the late 1980s. It has been under special state control for eventual sale to the private sector. (Business Day 16-Feb-2000) NIPPON SHINPAN CO.: To cease real estate biz, post loss ------------------------------------------------------- Nippon Shinpan Co. (8583), a nonbank financial institution, plans to get out of the real estate business by the end of fiscal 2001, The Nihon Keizai Shimbun learned Tuesday. The major credit card service company has about 80 billion yen worth of real estate for sale in Japan and about 50 billion yen worth of mortgage loan credits. The company also has about 50 billion yen worth of real estate in the U.S., Australia and other countries. In selling off or disposing of these real estate-related assets, Nippon Shinpan is expected to record about 40 billion yen in loss. The firm plans to use the proceeds to beef up its mainstay credit card and loan operations and to repay debts. Nippon Shinpan's real estate division marked about 300 million yen in loss in the fiscal year ended March 1999, due to a fall in land prices. The company had increased its investment in real estate to about 500 billion yen during the economic bubble era of the late 1980s. The market-price valuation method will be introduced in fiscal 2000 for real estate for sale, forcing companies to book the market value of property holdings. This trend is likely to encourage other nonbank financial institutions to withdraw from real estate-related operations. (Nikkei 16- Feb-2000) NISSAN MOTOR: Stock hits 13-month low ------------------------------------- Shares in Nissan Motor fell to a 13-month low yesterday as two corporate bankruptcies focused concern on the loss- making Japanese carmaker's future, brokers said. The weekend failure of supermarket operator Nagasakiya was followed on Monday by the collapse of mid-sized property developer L Kakuei. agasakiya's failure in particular revived concern about loss-making companies as banks scale back their credit lines. (Business Day 16-Feb-2000) SUMITOMO METAL INDUSTRIES: Net loss triggers exec paycut -------------------------------------------------------- Sumitomo Metal Industries Ltd is set to suffer its second straight net loss in the year to March, partly due to substantial extraordinary losses. As a result, the company will cut renumeration of its executives by up to 50% due to the firm's poor performance, the Nihon Keizai Shimbun reported. To underscore management responsibility for the deteriorating profit performance, Sumitomo Metal Industries reduced the renumeration of chairman Reijiro Mori and president Matao Kojima by 50%. The company also slashed salaries of senior vice president Mikio Kato and other executives by 20%-30%, depending on the division's performance they are responsible. The company has yet to decide how long the reductions will last. In January of last year, Sumitomo Metal reduced directors' salaries by 10%-20%, with the chairman and president taking a 20% cut. In the year to March 2000, the company is most likely to post a pretax loss due largely to weak domestic demand for the firm's mainstay seamless pipes, the weakness more than offset by rising exports to other Asian countries. (The Star 16-Feb-2000) ========= K O R E A ========= DAEWOO MOTOR: Bid invitations go out ------------------------------------ South Korea's ailing Daewoo group invited General Motors Corp. and other potential buyers to take part in a bidding for its carmaking business Daewoo Motor Co. and Ssangyong Motor Co. The group's corporate restructuring committee said in a statement Tuesday that the invitations were sent to "world- class foreign and domestic automobile manufacturers" and that participation via a consortium will be allowed. The potential buyers were being asked to submit letters of intent by Monday, it said. Daewoo did not identify the potential buyers but GM's Seoul office confirmed that the American auto giant has been invited to the bidding. South Korea's national news agency Yonhap, quoting unidentified industry sources, said Ford Motor Co. of the United States, DaimlerChrysler of Germany, Fiat of Italy, Volkswagen of Germany and South Korea's Hyundai Motor Co. were invited as well. Yonhap said one or two bidders will be selected by May for full-scale negotiations. The committee said letters had been sent out Monday inviting potential acquirers to submit their bids by February 21, adding that it would provide them with a chance to conduct a "limited" due diligence on Daewoo Motors. "We are going to hold a transparent and fair auction in which all terms will be screened carefully according to our principles," the committee's Han Yong-Chul said. "Yes, the price is the most important factor, but it's not everything. The winning company should contribute to the development of the local auto industry," he said. Finance Minister Lee Hun-Jai earlier named GM, Ford, Germany's Volkswagen and Italy's Fiat as potential foreign buyers for the whole of Daewoo Motors and its subsidiaries along with Seoul's biggest manufacturer, Hyundai Motors. Creditors have said that DaimlerChrysler was interested only in Ssangyong Motors, which Daewoo acquired two years ago. But government officials have indicated they would prefer to sell all of Daewoo Motor's assets together. The bidding schedule has been anticipated since January when Daewoo reached agreement with its foreign creditors on how to address its $4.84 billion in foreign debts. The deal removed the biggest stumbling block to restructuring Daewoo, the nation's third-largest conglomerate. South Korea sees a successful reform of the conglomerate as a key to its overall economic recovery. Under the deal, Daewoo's foreign creditor banks agreed to reclaim only 39 to 40 percent of their loans to Daewoo subsidiaries and regard the remainder as losses. Daewoo group narrowly escaped bankruptcy when its domestic creditors agreed last June to delay repayment of $8.3 billion in debt for six months and to extend $3.3 billion in new loans. In return, Daewoo agreed to sell or spin off 13 subsidiaries. Its 12 other units, including the carmaking arm, were placed under a restructuring program that calls for creditor banks to turn debts into equity or delay debt payment. Daewoo Motor started as a joint venture between Daewoo and GM in 1978. The partnership ended in 1992 when GM sold its 50 percent stake to Daewoo for $170 million. U.S. automakers hope to strengthen their presence in Asia, which is expected to become the fastest-growing auto market in the world. Daewoo Motor, South Korea's second largest automaker, produced 758,500 vehicles in 1999 at its 17 facilities in home and abroad. They include an operation in Poland that holds about a third of Poland's market, which sells more than 500,000 vehicles a year. At the end of June last year, Daewoo Motor had $18.3 billion in total assets and $13.9 billion in debt. Ssangyong Motor, a sport utility vehicle maker, produced 98,000 vehicles last year. It was acquired by Daewoo Motor in 1998. (AP Online 15-Feb-2000, Business Day 16-Feb- 2000) ===================== P H I L I P P I N E S ===================== GERRY COMMERCIAL: Sugar trader faces perjury raps NEW FRONTIER SUGAR CORP.: Sugar trader faces perjury raps SOUTH PACIFIC SUGAR CORP.: Sugar trader faces perjury raps ---------------------------------------------------------- A big-time sugar trader is facing perjury charges for allegedly lying before the House good government committee. Rep. Rolex Suplico (LAMP, Iloilo) told reporters yesterday that he would ask the committee to cite sugar trader Margarita Sia in contempt and punish her for supposedly hiding the truth. Sia, who controls South Pacific Sugar Corp., New Frontier Sugar Corp. and Gerry Commercial, is being investigated for her alleged smuggling into the country of 30,000 tons of sugar worth about P500 million. During a good government committee hearing in Bacolod City last weekend, Suplico said committee members asked Sia if she is the majority owner of Gerry Commercial. He said the trader denied controlling the sugar trading company but that he confronted her with documents showing her majority ownership of Gerry Commercial. He added Sia also insisted that she notified the Sugar Regulatory Administration (SRA) before her shipment arrived. "This claim is belied by official SRA records which show that notification was made only after the arrival of the shipment," he added. He pointed out that he had initially moved for citing Sia in contempt of the committee during the Bacolod City hearing, but that the panel postponed decision on his motion. "I will pursue this to its logical conclusion. Congressional inquiries should not be taken lightly by all concerned," he stressed. It was Suplico and Rep. Julio Ledesma (LAMP, Bacolod City) who had exposed the alleged smuggling of sugar by Sia's companies. Ledesma and the mayor of San Carlos City in his district even led Customs officials last year in impounding a North Korean cargo ship that docked in the city's port with tens of thousands of tons of Thai sugar without the proper documents. At that time, Ledesma said he checked with SRA Administrator Nicolas Alonzo if the shipment was covered with the proper SRA permits and was told that no such permits were issued. He said Sia was supposed to pay SRA millions in sugar levies before the shipment was to arrive, but that no such levies were paid. However, Sia's sugar cargo impounded in San Carlos City and another one held in Iloilo City were later released by Customs reportedly upon the intercession of a presidential friend. The sugar trader claimed then that all her shipments were legal. (The Philippine Star 16-Feb-2000) INT'L CONTAINER TERMINAL SVCS.: To hold port-pullout talks ---------------------------------------------------------- Listed port operator International Container Terminal Services, Inc. (ICTSI) said it will negotiate with the Argentinian government for a possible settlement following its decision to pull out from Port of Rosario due to worsening industrial peace in the area. ICTSI president Enrique Razon, Jr. told analysts yesterday that the company incurred $40 million in operating and capital investment losses in the operation of Port of Rosario in Santa Fe due to illegal strikes and loss of client confidence. As of end 1999, Puerto Rosario S.A. (Prosa) - incorporated by ICTSI to manage the concession - posted $12 million in net losses. Provincial authorities in the area have reportedly failed to restore peace at the port, which in turn resulted in heavy losses for the port. "Loss of confidence from clients, an extremely hostile working environment, extraordinary costs, negligence on the part of government officials, and the resultant heavy losses have prompted Prosa to withhold payment on the first (annual rental charge) due in January," ICTSI said. Prosa is 100%-owned by ICT International Holdings Corp., a subsidiary of ICTSI which holds interests in the port firm's foreign operations. "In ICT's business, it is normal to incur initial losses, and to encounter labor resistance as changes and betterments are introduced. This can last up to six months. However, repercussions of the strikes at the Port of Rosario were already starting to be damaging and far ranging, and PROSA realized that the situation was moving beyond the start-up stage," ICTSI said. Earlier, ICTSI said it was planning to be aggressive in the international market, as it is looking into several port development projects overseas. It has participated in the bidding of two port projects in Chile. These are the Valparaiso and San Antonio ports in Chile. The company is also looking at other ports in Latin America and the Middle East which are scheduled for privatization. At least half of ICTSI's earnings come from international operations. The list includes ports in Saudi Arabia, Tanzania and Egypt. (Business World 16-Feb-2000) NATIONAL STEEL CORP.: European group in buyout final stages ----------------------------------------------------------- The Pentium Group (PG) announced yesterday that they have successfully completed the buyout offer and financing arrangements to purchase National Steel Corp. (NSC). Pentium Group is in the final stages in its preparation to sign the offer sometime next week. Pentium Financing has been done in conjunction with the DLJ Group in New York. The Philippine government in general terms has given the go ahead to the Pentium Group offer and acquisition of NSC. The government is awaiting the final commitments in relation to the Pentium Group acquisition. Gilles Corset, chairman of the board of the Pentium Group based in Paris and Geneva said he is confident that NSC, under its new management will flourish and will supply all the steel requirements of the Philippines. The excess production will be exported to other Asian countries and become a major source of foreign currency. Plans are already underway for NSC initial public offering (IPO), two years after the re-start of its operation. The IPO already has indications of interest, and is actually over subscribed in the French and Swiss markets. Pentium Group has plans of turning NSC into a B2B (Business to Business) Internet business model. All production planning supplier relations and orders will be coordinated and processed through the Internet. This is to facilitate the large volume of transactions that is anticipated by NSC. Pentium Group has been in discussion with Microsoft and Data Return Corp. which has agreed to take care of all the B2B requirements for NSC. This move is intended to revolutionize NSC and jumpstart it's transition into the new age of Internet e-commerce. Another interested buyer of NSC, Novolipetsk Iron and Steel Corp. of Russia earlier formed a partnership with a group of local downstream steelmakers to pursue its bid to acquire the steel company. Russia's third-ranked steelmaker is currently conducting a thorough evaluation of NSC's assets before it makes an offer in tandem with the downstream steelmakers led by Philippine Steel Rolling Mills Association (PSRMA). In a statement, Novolipetsk head of foreign markets Y. A. Ermakov said the company would invest in NSC once it finds the investment climate here favorable. Novolipetsk is one of Russia's top 20 corporations but it is facing financial difficulties at home. It was abandoned by American investors, including financier George Soros, since Washington started clamping down on Russian steel imports last year. In tying up with Novolipetsk, PSRMA said this would ensure NSC of reliable and cheaper supply of slabs, a major raw material. Slab is a major cost factor of NSC which imports 90 percent of its total slab requirement. By eliminating this cost disadvantage, PSRMA and Novolipetsk are optimistic that NSC can produce competitively priced hot rolled coils, cold rolled coils and tinplate. Among the interested buyers of NSC, only PSRMA and other downstream steelmakers (belonging to the Association of Philippine Steel Mills and Filipino Galvanizers Institute) have offered to resuscitate the company's operations even without government protection in the form of higher tariffs and import quotas. PSRMA and the downstream steelmakers have committed to acquire all of NSC's output before importing their remaining requirements from abroad. Despite having a superior offer, the downstream steel industry is still considered dark horse in the bidding for NSC since Cathay Pacific Steel Co. is considered as the favorite. Capasco is owned by presidential adviser on iron and steel John Ng and banker Benjamin Chua who are both close allies of taipan Lucio Tan. The beer and tobacco tycoon revealed that he has a majority interest in Philippine National Bank which, as the biggest creditor of NSC, has a major say on who gets NSC. With the backing of the government, PNB and other creditor banks have moved to foreclose on NSC's assets because of the steel giant's failure to meet mounting interest rate expenses. But NSC's controlling shareholder, Hottick Investments- Renong Bhd. of Malaysia, has obtained a temporary restraining order stopping the bidding of NSC's assets and it has applied for a debt rehabilitation program with the Securities and Exchange Commission. The government and the banks want a new investor in NSC who will pump in new cash of $130 million to reopen its Iligan steel plant (which has been shut down since November last year) and strengthen its operations to compete with foreign steelmakers. The government, which is blaming the Malaysians' mismanagement for NSC's woes, was even willing to impose barriers to protect the local steel industry in order to drum up interest in NSC. (The Philippine Star, Philippine Daily Inquirer 15-Feb-2000) SHEMBERG GROUP: Creditors OK debt relief ---------------------------------------- Cebu-based "carageenan king" Benson Dakay has dropped plans to sell the Shemberg group after 18 creditor-banks agreed to restructure its P3 billion in outstanding debts, Inquirer sources said yesterday. Based on an emerging rehabilitation plan accepted in principle by the creditors' consortium led by Equitable-PCI Bank, Shemberg Marketing Corp. and Shemberg Food Inc. will be allowed to restructure their debts over a period of 10 years, with a two-year grace period on principal. The sources said the restructuring of Dakay's companies would make it easier for him to attract new investors who would infuse fresh capital into the company, which was badly hit by the Asian financial crisis. Within 24 months from the date of restructuring, the preliminary blueprint stated that the Shemberg group must reduce outstanding debts by at least 35 percent through any of the following means: o Dacion en pago or asset swap. o Conversion of debt into equity. o Sale to cash of some property. The sources said the debts would be restructured at an interest rate based on the average 91-day Treasury bill yield and Philippine interbank offered rate (Phibor) plus a one percent spread for the first two years. From the third year, the loans will be repaid at a spread of 1.5 percent. The Shemberg group will likewise be required to surrender additional property to cover its liabilities. A source said that at present, only 67 percent of outstanding loans were covered by collateral. "They will have to give additional property to cover the 33-percent deficiency," the source said. Among the Shemberg group's biggest creditors are Equitable- PCIBank (P630 million), UCPB (P291 million), Landbank (P421 million), Far East Bank and Trust Co. (P541 million), Bank of the Philippine Islands (P300 million) and Metrobank (P263 million). The Shemberg group was forced to seek concessions from its creditors because it was badly hit by the peso devaluation in July 1997. A big chunk of the group's loans were dollar- denominated. Another factor which had depressed the group's earning capacity was its decision to invest in a subsidiary engaged in the biotechnology business. The investment in this subsidiary resulted in cost overruns which had adversely affected the core carageenan business. The sources said that at present, Dakay was still scouting for a new investor to bring the Shemberg group back to a formidable financial footing. (Philippine Daily Inquirer 15-Feb-2000) UNIWIDE GROUP: Asking for 50% debt repayment discount ----------------------------------------------------- The management of cash-strapped Uniwide Group of Companies is asking creditors and suppliers for a 20% to 50% discount on the payment of loans. A well-placed company source told BusinessWorld yesterday that the group is proposing to pay off obligations in cash, provided the creditors and suppliers agree to the proposed payment discount. Out of the Uniwide group's total debt of 11.1 billion Philippine pesos (US$274.8 million at PhP40.396:US$1), some PhP6.95 billion ($172 million) is owed to 13 creditor banks. "We're negotiating for a haircut in the payment of our obligations. We're asking for a discount from 20% to 50%. We will not restructure our debts anymore but instead pay them in cash but at a discount," the company official said. The source added that the group is also planning to settle obligations via debt-for-asset swap. All properties of the Uniwide Group including properties in Coastal Road, Maragondon and Tarnate in Cavite and in Cabuyao, Laguna will be used to pay off debts. "All our properties that will not be needed will be used for dacion en pago aside from the Cubao property and the personal properties of the Gow family," the source said. Last week, French retail firm Casino Guichard-Perrachon SA, France's second-largest retail chain, has agreed to invest $110 million (approximately PhP4.4 billion) in the ailing retail company. The capital infusion is equivalent to 60% shareholdings currently held by the Gow family. Under the agreement, Casino will acquire Uniwide's 10 hypermarkets or warehouse-type discount stores, one distribution center and five real estate projects. The said assets are estimated to be worth PhP4 billion ($99 million). However, the French group will only infuse its investment once Uniwide's assets have been restructured and transferred debt-free. The management is now fast-tracking the settlement of the companies' debts. The Uniwide group has already settled obligations owed to East Asia Capital Corp. amounting to PhP60.4 million ($1.5 million) and United Coconut Planters Bank totaling PhP1.044 billion ($25.8 million). The Securities and Exchange Commission (SEC) has extended for the fourth time Uniwide group's debt moratorium pending submission of the said revised rehabilitation plan. The recent entry of Casino may just be the key in preserving operations of Uniwide affiliates -- Uniwide Sales Warehouse Club, Inc. (USWCI) and Uniwide Sales Realty & Resources Corp. (USRRC). In a revised rehabilitation plan filed with the SEC yesterday, the Uniwide group said "the fresh equity infusion together with the dacion en pago arrangements with the creditor banks will allow (the firm) to settle its obligations." Casino's PhP3.57-billion ($88.4 million) investment will be used to pay off obligations not settled through dacion en pago, allowing repayment of all debts of Uniwide Holdings, Inc. (UHI), USWCI and USRRC. Uniwide is set to restructure UHI to wholly-owned USRRC which will be the property development arm and USWCI which will be the retail company. "The corporate restructuring folds the retail operations of USWCI into UHI, transforming UHI from a mere property developer and franchisor of the Uniwide brand name into a retailer with the potential to be a leading retailer in the country," Uniwide said. From Casino's investment, it is projected that over 4,000 direct jobs will be saved, more than 2,000 suppliers will resume business stalled by the temporary halt in Uniwide's business operations, while more than 200,000 workers of suppliers will regain employment. The Casino Group also intends to construct and operate five additional warehouse club stores over the next several years in various parts of the country. (Business World 15-Feb-2000) UNIWIDE SALES WAREHOUSE CLUB: French retailer signs MOU ------------------------------------------------------- The French retail giant, Casino Guichard-Perrachon will pay P3.57 billion in cash for 89.2 percent of Uniwide Sales Warehouse Club Inc. (USWCI), the retail arm of the cash- strapped Uniwide group of companies. The Casino Group and UHI signed a memorandum of understanding (MOU) for the sale of the warehouse clubs which will be finalized by June this year. In a disclosure to the Securities and Exchange Commission (SEC), Uniwide said that with the fresh equity infusion, together with the dacion en pago arrangements with the creditor banks, Uniwide will be able to settle a substantial portion of its obligations. The sale is part of the rehabilitation plan for Uniwide. A majority of its creditor banks has already agreed in principle to the dacion en pago or payment in kind arrangement, and negotiations are currently centered on valuation issues. Recently Uniwide signed a memorandum of agreement (MOA) with two of its creditors, the United Coconut Planters Bank and East Asia Capital. Two other banks are currently preparing their MOA for signing within the next two weeks. The Casino Group, aside from upgrading the existing Warehouse Club stores, will also construct and operate five additional Warehouse Club stores in the next few years. The properties have already been identified. The new investors will also raise working capital and capital expenditure related to the refurbishing and upgrading of all existing stores. Prior to the target closing date, Uniwide has to comply with all the conditions spelled out in the MOU. The Uniwide receiver group said the investment of the Casino Group will save about 4,000 direct jobs, more than 2,000 suppliers will resume business stalled by problems of Uniwide, while more than 2000,000 workers of suppliers will regain employment. There are 10 Warehouse Club stores nationwide and five distribution centers. The combined sales of these stores from July-December 1999, reached P2.41 billion and P5.35 billion for the entire year. Uniwide has piled up debts of about P12 billion, a result of an all-timed expansion and a failed diversification program. (The Philippine Star 15- Feb-2000) =============== T H A I L A N D =============== SIAM CEMENT: Reports Baht 4.7B loss ----------------------------------- Siam Cement, Thailand's largest industrial group, fell to a larger-than-expected loss in 1999 from a profit the previous year because of a decline in the value of the baht and the sale of subsidiaries at below cost. Its consolidated loss was 4.7 billion baht ($125 million), or 39.15 baht a share, compared with a profit of 19.3 billion baht, or 160.84 baht a share, in 1998. The mean estimate by five securities houses polled by IBES predicted a loss of about 13.5 baht a share. The diversified group's petrochemical sales exceeded its cement and building materials sales for the first time because of a building glut, a legacy of the Asian financial crisis that hit Thailand first in 1997. "The building materials business remains a problem," said President Chumpol NaLamlieng. "It will take about two more years to recover because of all the over-construction." The company, which also makes a variety of chemicals, pulp and paper, said that without the foreign exchange and investment losses, it made an operating profit of 2 billion baht. Siam Cement ended in the black in 1998 despite an operating loss of 1.8 billion baht, because that year the baht appreciated against the dollar, producing a currency gain. Last year, though, the baht's weakness increased the burden of the company's foreign currency debt. Total sales rose 5 percent to 108.2 billion baht. Cement sales comprised a fifth of the total, falling 10 percent. Petrochemical sales almost doubled to 29 billion baht. Pulp and paper sales rose by about 10 percent to 22 billion baht, almost on a par with cement sales. The company expects to increase sales by 10 percent this year. Siam Cement had assets of 271 billion baht last year, down 6 percent from a year earlier as the company sold stakes in auto parts producers such as Nawaloha Industry, Siam AT Industry Co. and Thai Engineering Industry Co. The company has achieved about 60 percent to its goal of divesting "non-core" units, whose combined assets are about 60 billion baht, Chumpol said. The company's debt restructuring program calls for it to focus on three core industries: cement, chemicals and pulp and paper. (Business Day 15-Feb-2000) SIAM CEMENT PLC: Unloads Bt35B in holdings ------------------------------------------ Siam Cement Plc, the country's largest industrial conglomerate, has successfully divested Bt35 billion of its holdings in non-core subsidiaries and affiliated firms since the first quarter of last year, in line with its restructuring to focus on core businesses. The divested amount represents about 13 per cent of the conglomerate's total assets, which totalled Bt271.48 billion at the end of the year, and on schedule with the plan to ultimately divest assets worth Bt60 billion. "While we're close to completing the financial restructuring plan, we will have to further continue with this (divestiture)," said Aviruth Wongbuddhapitak, SCC vice-president for finance. SCC plans to sell most of, or entire, stakes in businesses that include the production of float glass, auto parts and alloy wheels. The company yesterday reported improved performance last year with a consolidated operating profit of Bt1.999 billion, a Bt3.84 billion increase from 1998 when it showed operating losses of Bt1.84 billion. The company attributed the rise to higher sales revenues and the decrease in costs of sales and administrative expenses. After forex loss and restructuring expenses, SCC reported a net loss of Bt4.7 billion for the year, compared to a net profit of Bt19 billion in 1998, when the company recorded forex gains. Losses in 1999 were attributable to a swing from foreign exchange gains of Bt24.51 billion in 1998 to losses of Bt4.65 billion. In its non-consolidated statement, Siam Cement showed a net profit of Bt15.508 billion due to the transfer of assets at appraised value in the cement business to subsidiaries of Siam Cement Industry Co Ltd, a wholly-owned company, as part of its business restructuring programme. Investors dumped the company's shares yesterday, pushing the price down to Bt538 at end of trading, from Bt588 at closing on Friday. SCC drew up a plan at the beginning of 1999 to restructure both its financial structure, to bring down the portion of foreign currency-denominated loans, and the business structure to focus on only three major businesses - petrochemicals, cement and paper. The plan's success was reflected in the operating profit, before special items and forex losses, of Bt1.999 billion for the year 1999. The petrochemical business made the highest contribution with net sales of Bt28.6 billion compared to Bt15 billion the previous year. Cement was the weakest performer. Income from the cement group before exchange rate effects and special items dropped to Bt302 million from Bt529 billion, as sales fell to Bt22.69 billion from Bt25.20 billion in 1998. SCC president Chumpol Na Lamlieng anticipated a brighter in the sectior as the construction sector has room for growth, seen from the rising sales of construction materials. The company disclosed that consolidated revenue for last year was Bt111 billion, up Bt5.816 billion, or 6 per cent, from 1998. This was attributable to the 3 per cent increase in domestic sales and 9 per cent increase in export sales. Sixty-seven per cent of total sales were derived from the core businesses while the total export value accounted for 30 per cent. Despite the losses, an analyst from Capital Nomura Securities Plc said that the results are in line with expectations. "At the present market price, SCC is reasonable for long- term investment as it has sufficiently reduced interest expenses," he said. In 1999, SCC's average interest cost was 8 per cent, slightly higher than the previous year's level. SCC last year issued bonds of Bt50 billion to refinance foreign loans. The ultimate aim is to reduce the portion of foreign debt to 25 per cent of the total, to minimise the impact of exchange rate fluctuations. The debentures reduced for foreign debt from US$4.2 billion in 1998 to US$1.8 billion last year, accounting for 36 per cent of the total debt. Aviruth said SCC plans to maintain the foreign loan portion between US$500 million and $1 billion which will better reflect its trade finance as well as foreign currency- denominated loans. The company's board of directors recently approved another Bt50 billion issue of bond with up to 20 years' maturity. The plan is awaiting approval by shareholders, who meet in late March. "The amount represents our financial obligations to come due in the next few years. However, we may not issue all of the bonds now since the operating income is sufficient to service debts (due this year)," Aviruth said. Without revealing the amount of obligations in the next few years, Aviruth said the total value of bonds to be issued would depend on the negotiations with creditors to repay some debts before the due date. SCC needs to repay debts of Bt15 billion this year. Besides the bond issuance, SCC will also see the extension of loan maturity. "As a result, the company's short-term debts account for only 23 per cent, and the amount serves as working capital," Chumpol said. (The Nation 15-Feb- 2000) THAI PETROCHEMICAL INDUS.: Creditors ask court for control ---------------------------------------------------------- Creditors of Thai Petrochemical Industry petitioned Thailand's bankruptcy court Friday to allow them to take control of the company. The bankruptcy court is due to meet today to consider the creditors' plans to take over the company, as well as TPI's attempt to block the takeover. TPI management couldn't be reached for comment Friday. After a telephone conference early Friday, creditors decided to petition Thailand's bankruptcy court to appoint an independent planner to administer a plan for restructuring TPI's $3.5 billion in debts, sources close to the talks said. Appointment of a planner chosen by creditors will give them control of the company's management. Creditors filed the petition in court late Friday. The creditors' decision marks the collapse of more than two years of negotiations with TPI chief executive and prominent shareholder, Prachai Leophairantana, on how to restructure the company's debts. The creditors' decision came after TPI filed objections last week in court to the restructuring plan it had accepted in mid-January. TPI filed its first objection Wednesday, saying creditors acted in bad faith in the restructuring plan, falsely asserting the company was insolvent. After receiving an ultimatum from creditors, TPI withdrew the objection early Thursday but then filed another objection just before the close of business late Thursday. TPI has also evicted staff of international auditors PriceWaterhouseCoopers, appointed by the creditors to monitor TPI's financial status on their behalf, a source close the negotiations said. (The Asian Wall Street Journal 14-Feb-2000) THAI PETROCHEMICAL INDUS.: Bankruptcy court delays decision ----------------------------------------------------------- Thai Petrochemical Industry's (TPI) bankruptcy ruling was delayed to tomorrow, as the court sought to settle a dispute over who should manage the rehabilitation of the country's largest delinquent debtor. Five creditors led by the U.S. Export-Import Bank, International Finance Corp. and Bangkok Bank Pcl want their own representative to manage the chemicals producer while a restructuring plan is initiated, said Judge Wat Luklertkul. Thai Petrochem, behind on about $3.5 billion of debt, wants Chief Executive Prachai Leophairatana as planner for the three months or so needed for the revamp. The judge said the delay of at least two days would provide time for opinions from more than 100 other creditors. Documents must be filed by Feb. 16, after which a ruling would be made, he said. Creditors and Thai Petrochem earlier agreed on Prachai as manager, though some creditors changed their mind after the Thai Petrochem founder this month asked the lenders to write off more debt then earlier agreed upon. The request for a different manager "has been forced upon the (five creditors) as a result of TPI's clear breach of its formal agreement not to raise any objections to the reorganization plan," the group of five said in a statement. The preliminary agreement, made a year ago, called for forgiveness on $400 million of unpaid interest. Prachai recently asked for an increase to $600 million, and both sides also disagree on terms of a proposed $1 billion share sale. The proposed changes by Thai Petrochem "would represent a fundamental and unacceptable change" to the reorganization plan, the statement said. "The disagreement is the widest among creditors and a debtor since the Bankruptcy Court was established" last year, Wat said. In all other large cases, both sides agreed on all terms of preliminary restructuring proposals, he said. Thai Petrochemical has about 150 creditors. The U.S. Exim Bank, Bangkok Bank and units of Citigroup Inc. and Bank of America Corp., and IFC, the private lending arm of the World Bank, comprise those who want a plan administrator other than the founder of Thai Petrochem. Other major creditors include the KfW, one of Germany's development banks; Krung Thai Bank Pcl, which is owned by the Thai government; and Sanwa Bank. (Business Day 15-Feb- 2000) THAI PETROCHEMICAL INDUS.: Challenges creditors ----------------------------------------------- Thailand's leading corporate debtor, Thai Petrochemical Industry (TPI), yesterday became the first indebted company to challenge the definition of corporate insolvency in the Central Bankruptcy Court. There was no ruling yesterday as the court was able to hear testimony from only five creditors before adjourning the hearing to today. During the past dozen debt-restructuring cases before the court there were no disputes between creditors and debtors over whether the company was insolvent or not, said legal and court officials. When debt-restructuring cases go to the court, debtor companies and creditors usually agree that the company is insolvent and that it requires debt restructuring to turn it around. An exception was the controversial case involving Thai Identity Sugar Group. After accepting a debt-restructuring plan, its owner later claimed solvency. However, in the case of TPI, the indebted company filed a petition objecting to the debt-restructuring plan prior to the court's approval of it. TPI is claiming that it is not insolvent as alleged. In fact, the company's assets exceed its liabilities by Bt28 billion, according to the petition from TPI. However, according to the creditors' debt-restructuring plan, TPI's liabilities exceeded its assets by more than Bt100 billion. With competing views on the company's financial health, the court is facing a major test on what constitutes corporate insolvency. Khalid A Mirza, the chief Thai representative of International Finance Corp (IFC), the investment arm of the World Bank and a major creditor of TPI, could not be reached for comment yesterday. However, in an earlier interview with The Nation he said that the definition of insolvency in Thai law, which is currently based on an analysis of a company's balance sheet, was a major stumbling block to the corporate-debt restructuring process in Thailand. A more effective definition of insolvency would be based on cashflow, he said. "At present, many insolvent corporates can still escape serious restructuring because they are able to show that their assets still exceed liabilities," Mirza added. TPI owes the IFC US$500 million. TPI's solvency claim is based on financial results as at Sept 30, 1999. The company has defaulted on its debt repayment since July 1997. However, last year, it reportedly had a monthly cashflow of Bt4 billion. Apichart Phunkeasorn, a lawyer with Johnson Stokes and Master, a firm representing creditors, said yesterday the debtor's default on interest and principal contributed to the insolvency claim. When debtor companies do not support restructuring plans, creditors have to point out their true status rather than focusing on balance sheets, he said. According to court officials, several matters must be considered in the TPI case: whether TPI is a limited company; whether it has more than Bt10 million in debt; whether it has more liabilities than assets; and whether rehabilitation is possible. TPI will try to convince the court that it is still solvent and therefore has no need for the debt-restructuring plan filed by its creditors, sources said. (The Nation 15-Feb- 2000) THONBURI AUTOMOTIVE ASSEMBLY PLANT: Debt reform ahead ----------------------------------------------------- Creditors controlling 85 per cent of Thonburi Automotive Assembly Plant's (TAAP) Bt23.3-billion debt have approved a debt-restructuring plan for the Thai luxury car maker at a meeting yesterday. The plan features conversion of debts into equity, debt foregiveness, disposal of some assets and lower interest rate. The debt reform would proceed under the supervision of the Corporate Debt Restructuring Authority Committee (CDRAC). TAAP director Mike Jirapongponnaz said that the company would file a petition in the Central Bankruptcy Court this week, asking for rehabilitation under the court to prevent minor creditors who did not endorse the plan from filing a suit against the firm. "According to the CDRAC's process, the company would be able to ink the deal with 15 creditors 60 days after filing the petition to the court," he said. Bangkok Bank, Krung Thai Bank, Industrial Finance Corporation of Thailand, Thai Military Bank, Thai Farmers Bank, Siam City Bank and Sumitomo Bank are among the major creditors who endorsed the debt plan for the Mercedes Benz core dealer and manufacturer. Dai-Ichi Kangyong Bank and Bank of Ayudhya were reportedly absent. Under the plan, the recently-established Thonburi Automotive Group (TAG) will hold the entire stake in TAAP and in return the present major shareholders of TAAP (the Viriyahphant family) will take 27 per cent in TAG while the remainder will be held by the creditors. In addition, the creditors will pump fresh funds into TAAP to finance its business. The indebted carmaker's registered capital stands at Bt500 million. "Our creditors offered an incentive to TAAP. If the company always services its debts, the creditors will allow TAAP to take more stake in TAG," Mike said. He said that after completion of the debt restructuring, TAAP would remain a subcontractor and dealer of DaimlerChrysler. "Although DaimlerChryler is not a shareholder in TAAP, it will continue providing support to us," he said. (The Nation 15-Feb-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. For subscription information, contact Christopher Beard at 301/951-6400. *** End of Transmission ***