/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/001213.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, December 13, 2000, Vol. 3, No. 242 Headlines * A U S T R A L I A * AUSVEGAS: Gocorp throws in hand IT&E: Re-does books, gain turns into loss OMNI GROUP: Calls in receiver SATELLITE GROUP: ASIC sues execs for breach SOUTHERN EQUITY HLDGS.: To solve woes by acquisition * C H I N A & H O N G K O N G * CHINA CYBERWORLD LTD.: Posts HK$17.95M 1H loss GOLDEN CHINA (ASIA-PAC) LTD: Facing winding up petition GRANDCO (HOLDINGS) LTD: Facing winding up petition GRAND MASTER ENGINEERING CO.LTD: Facing winding up petition GUANGZHOU INT'L TRUST: Judge blocks wind-up KIN DON HOLDINGS: Faces winding-up petition; stock plunges LUCKY DAY LTD: Facing winding up petition XINJIANG SHIYUE TRACTOR GROUP : Debt-equity swap * J A P A N * CHIYODA CORP.: 1H group net loss seen at 4.3B yen CHIYODA MUTUAL LIFE: Tokai unionists seek pension losses KUMAGAI GUMI CO.: Struggles to 6-mo. loss MITSUI CONSTRUC.CO.: Struggles to 6-mo. loss SATO KOGYO CO.: Struggles to 6-mo. loss * K O R E A * FIRST FIRE & MARINE: Accused of setting up illegal fund HYUNDAI GROUP: Close to selling Sunshine Plaza stake MIJU STEEL MFG.CO.: Creditors OK payment rescheduling SAMSUNG COMMERCIAL: Parts suppliers cut off supply stream SAMSUNG COMMERCIAL: Court declares it bankrupt SAMSUNG MOTOR: Parent group won't cover all its debt SKM: Banks to track personal wealth of owner * M A L A Y S I A * MALAYSIAN AIR LINES: White knight SairGroup steps forward PSC INDUSTRIES Revamp proposed over five years UNITED ENGINEERS MALAYSIA: Shares continue to fall * P H I L I P P I N E S * PHILIPPINE TEL.& TEL.CORP: Creditors OK debt-equity swap * T H A I L A N D * THAI PETROCHEM.INDUS.: Court postpones rehab plan nod THAI TELE.TELECOMM.: Expecting Bt4.5B annual net loss ================= A U S T R A L I A ================= AUSVEGAS: Gocorp throws in hand ------------------------------- The Federal Government's 12-month moratorium on interactive gaming yesterday claimed its second victim as Queensland's Gocorp indicated it would shut down its Internet casino, Ausvegas. GGS, Australia's main online gambling software and equipment tester, has meanwhile formed a new company with South Africa's Bureau of Standards to test casino systems in that jurisdiction. Gocorp, which raised $20 million when it listed in June, told investors yesterday it would be "untenable" for it to continue operating its Internet casino business given the risks associated with any breach of the new legislation. The bill, passed last week in the Senate, makes it an offence to run an interactive gambling service that was not operating before May 19 this year. Breaches will attract punitive fines: up to $1.1 million a day for companies and up to $200,000 a day for senior company executives. Although Gocorp's Ausvegas site launched three days before the cut-off date, it is understood the group has been caught out by the legislation's fine print, which dictates operators must have had at least one arm's-length paying customer and kept the same name. Ausvegas began attracting customers only in June and originally launched under the name SevenRed. Gocorp indicated it would take legal action against the Federal Government, wanting compensation for the $30 million it has spent developing its business. Any damages claim is expected to be significant. Last week, the Federal Group's Mr Greg Farrell said that he too was planning legal action against the Government over the online casino his company will be forced to close, at a cost of 20 Tasmanian jobs and more than $20 million invested. Gocorp, whose shares will now remain suspended until January when a decision is made on a new direction, also attacked the Federal Government in its statement to the stock exchange. "This legislation does nothing whatsoever to protect the interests of Australian consumers," it read. "In fact, it takes away the only consumer protection for online gamblers that exists in cyberspace today and will only serve to force consumers into the arms of the many potentially unscrupulous and unregulated operators that exist." While Gocorp chief executive Mr Paul Appleby declined to comment on his company's future, it is understood Gocorp is most likely to morph into an e-commerce and datacentre software licenser. GGS's Mr Jeff Boulous said the company, which had tested most of Australia's gaming sites for compliance with various State Government regulations, will now focus on South Africa, an Internet gaming-friendly jurisdiction. My Casino, which claims to be unaffected by the new legislation because its online operations are run out of Vanuatu, has nonetheless reshuffled its management team to capitalise on the decreasing competition. Locally listed My Casino yesterday placed managing director Mr Gordon McIntosh in charge of a more aggressive marketing push and handed the company's reins to chairman Mr Mike O'Donnell. With the Australian market now closed, online casino operators are expected to flock to South Africa; tax havens such as Vanuatu and Gibraltar; and US Indian reservations. (Sydney Morning Herald 12-Dec-2000) IT&E: Re-does books, gain turns into loss ----------------------------------------- Stock in IT&e hit a new low yesterday following news the company had incurred a $339,500 loss for the three months ended Sept. 30, rather than a $911,670 gain as previously stated. IT&e also told investors that revenue for the quarter was $14.6 million, not $14.9 million, and, in a revised quarterly cash flow statement, reported cash reserves were actually $4.3 million as at September 30, not $4.9 million. Shares in the Web integrator slumped more than 35 per cent to a low of 24c and closed down 13c at 25c on the changes, which are the result of a review of IT&e's business operations and financial position. That review found that the group's former management team was not consistent in its accounting policies and, in particular, changed the application of the company's cost capitalization policy, resulting in excessive capitalisation of costs for the September quarter. The team also failed to apply basic accrual accounting and expense cut-off principles, the review found; nor did it advise the auditors of the full extent of the accounting policies when inquiries were made before the release of the quarter's results. As a result, the previous team, which included recently departed chief executive, Mr Jeremy Jilla, and the chief financial officer, Mr Andrew Rettie, had overstated cash receipts, net operating cash flows, cash on hand and net cash. IT&e said yesterday that the company's earnings forecasts for this year were unlikely to be met. (Sydney Morning Herald 12-Dec-2000) OMNI GROUP: Calls in receiver ----------------------------- Australian telecommunications company Omni Group handed over its control to a receiver on Dec. 8. Arthur Andersen's Mark Mentha will analyze options for the Melbourne-based company and its operating subsidiary, Omnitel Australia. Shares in the group, previously at $A0.08, have been suspended from trading. Three nonexecutive directors resigned from Omni's board the day before its Nov. 29 annual meeting. Two of them had been brought in to turn around the fortunes of the technology company. Omni reported a $A5.2 million loss in September. SATELLITE GROUP: ASIC sues execs for breach ------------------------------------------- Gregory Joseph Fisher, the flamboyant founder of the world's first listed gay company, will face Supreme Court civil action over the collapse of the Satellite Group. After a five-month investigation by the Australian Securities and Investment Commission, Mr Fisher and his business partner, discharged former bankrupt Mr Jonathon Owen Broster, and a company associated with Mr Broster, last night were accused of breaching their legal duties as officers of the Satellite Group and failing to act in the interests of shareholders. "We allege that they used their positions to gain an advantage for themselves at the expense of Satellite by causing approximately $1.9 million to be paid from the company to companies related to them personally," ASIC chairman Mr David Knott said yesterday. "The breaches of the law alleged by ASIC are serious enough to seek orders against the defendants for both compensation and civil penalties." The Satellite Group, floated in September last year, never traded above its 50c issue price and was suspended from trading in July at 15c following a Herald investigation into Mr Fisher's business activities. That investigation revealed Mr Fisher had been the subject of several investigations by ASIC during the 1990s and had agreed to stand aside as a director of a company that applied for a security dealer's licence. It further revealed he had been the subject of litigation from a former employer for breach of promise and had falsely claimed in the Satellite prospectus that he held "bachelor of business qualifications." "I finished off my schooling with the overseas school [of the UCLA]," Mr Fisher told the Herald. But the UCLA has no record of Mr Fisher, does not have an overseas school and does not offer a bachelor of business qualification. Later investigations by the Herald revealed Mr Fisher had sold apartments in his Sydney property developments off the plan and then taken out so many mortgages the company was unable to transfer title to the buyers. Many of those apartments were sold at half the price listed in the prospectus, thereby overstating Satellite Group assets. Mr Fisher also admitted that none of the $25 million raised in the Satellite float had been used to retire debt on the company's property developments, despite a written promise in the prospectus. ASIC will be seeking orders that Mr Fisher and Mr Broster be banned from ever being involved in the management of a company. But the entrepreneur, who last week placed his private company in the hands of an administrator, appeared unmoved by yesterday's events. "I am pleased the matter is moving to court where it can be dealt with properly and where my part of the story can be told," he said. Never short of bravado, Mr Fisher also maintained that he had nothing to do with the collapse of Satellite. "Decisions made subsequent to my removal resulted in the downfall of the company," he said. Mr Knott last night said ASIC was concerned about security given over an $800,000 loan to the two men and would continue to investigate issues related to the float and management of Satellite. (Sydney Morning Herald 12-Dec- 2000) SOUTHERN EQUITY HLDGS.: To solve woes by acquisition ---------------------------------------------------- Southern Equity Holdings is again looking to the new economy for salvation, planning to buy convergent media player WorldAudio by issuing 30 million shares at 14c each in order to raise $4.2 million. The plan is to create a national metropolitan commercial broadcast radio network. Southern Equity, which had accumulated losses of $5.5 million as of June 30 and but $287,000 in cash, also plans to raise $4.6 million for working capital through the public issue of 20 million shares and 57.9 million options. Its main source of revenue is a 50 percent stake in Queensland developer Fobuzi, which generated $578,000 in revenue last year. Southern Equity's previous foray into IT has involved it in litigation as it fights to retrieve a $2 million loan from millennium bug software company MFXR. The legal costs added to its $3.25 million loss last year. Company secretary Charlie Latham said the board would seek shareholder approval for the share issue at a date to be determined. WorldAudio director Graeme Logan said both companies had been discussing the venture for the past six weeks. Sydney-based WorldAudio has 30 broadcast apparatus licences and plans to broadcast radio via free to air, Internet and wireless application protocol media. Southern Equity shares traded at 14c being suspended yesterday, well below its 99c price of February, 1999. (The Advertiser 12-Dec- 2000) ============================== C H I N A & H O N G K O N G ============================== CHINA CYBERWORLD LTD.: Posts HK$17.95M 1H loss ---------------------------------------------- China Cyberworld Ltd., an electronics maker and property developer formerly known as Chuang's China Investments Ltd., recorded a net loss of HK$17.95 million for the six months ended Sept. 30. That's a turnaround from the net profit of HK$91.49 million it posted for the same period a year earlier. Loss per share was 2.11 HK cents compared with 15.3 HK cents the previous period. Revenue rose 13 percent to HK$71.67 million, however. No interim dividend was proposed. GOLDEN CHINA (ASIA-PAC) LTD: Facing winding up petition ------------------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing on February 6, 2001, on the petition of Lee Yuet Fung for the winding up of Golden China (Asia-Pac) Limited. A notice of legal appearance must be filed on or before February 5. GRANDCO (HOLDINGS) LTD: Facing winding up petition -------------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing on December 20 on the petition of Centaline Property Agency Limited for the winding up of Grandco (Holdings) Limited. A notice of legal appearance must be filed on or before December 19. GRAND MASTER ENGINEERING CO.LTD: Facing winding up petition ----------------------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing on January 9, 2001, on the petition of Nan Fung Finance Limited for the winding up of Grand Master Engineering Company Limited. A notice of legal appearance must be filed on or before January 8. GUANGZHOU INT'L TRUST: Judge blocks wind-up ------------------------------------------- A judge has sealed the fate of Guangzhou International Trust and Investment Corp (Gzitic) by dismissing a petition to wind up its Hong Kong arm - the final hurdle in a planned restructuring of the company. Liquidation proceedings against Guangzhou Finance filed by a US$30 million loan syndicate had to be withdrawn in order for the restructuring to proceed of Gzitic - the fund- raising arm of the Guangzhou municipal government. This was a condition laid down by 162 foreign creditors of Gzitic who have agreed to a restructuring which will settle US$1 billion in debt owed. Madam Justice Maria Yuen Ka-ning gave the green light yesterday by dismissing the winding-up petition at the High Court and removing provisional liquidators from the company. The petitioning syndicate and supporting creditors had agreed with the company to withdraw the winding-up proceedings. "It's very much a milestone - a big milestone in this restructuring," explained PricewaterhouseCoopers partner Ted Osborn, Gzitic's financial adviser. "This makes it all possible now to take it to the next level, and to get payments out as soon as possible." The Hong Kong arm has debts of US$286 million and was considered a key element of any restructuring as creditors were keen to keep a Hong Kong entity in operation. All of Guangzhou Finance's financial creditors and 99 per cent of Gzitic's foreign creditors have accepted the terms of the Gzitic restructuring agreement. It will now be submitted for approval in China. The Guangzhou government, the People's Bank of China and the State Administration of Foreign Exchange must also sanction the restructuring. This will take a number of weeks. The Gzitic collapse came on the heels of Beijing's ordered closure of Guangdong International Trust and Investment Corp (Gitic) in October 1998, Guangdong province's finance arm. It had failed to repay US$4.7 billion in debt, indicative of deep-rooted financial troubles among mainland trust and investment companies. Creditors have agreed to a liquidation that will start paying off 21.1 billion yuan (about HK$19.77 billion). The Gzitic restructuring is one of several such settlements in the itic sector, all of which depend on different fundamentals and varying degrees of debt. Gzitic creditors now have two options: an immediate one-off cash payment covering 50 per cent of outstanding principal; or a 100 per cent settlement that could extend beyond 10 years. Funding for the restructuring will be met by a cash allocation from the municipal government but the company will also liquidate assets to help meet about 20 per cent of its obligations. According to Mr Osborn, after creditors have made their selection, there will be a grace period during which they can switch to the other option. The restructuring agreement is the result of months of negotiations. It represents an accord between Gzitic and the steering committee of foreign creditor banks led by Standard Chartered Bank. (South China Morning Post 12-Dec- 2000) KIN DON HOLDINGS: Faces winding-up petition; stock plunges ---------------------------------------------------------- Garment maker Kin Don Holdings Ltd. shares dived up to 27.7 percent after it confirmed it faces a winding-up petition filed by Stone Church LLC, a convertible debenture holder. By mid morning Tuesday, the stock was the largest percentage loser of the day, trading at 3.8 HK cents, down 19.1 percent. Turnover was HK$181,898. The petition is scheduled to be heard by the High Court on Feb. 28 and involves a judgment debt of US$4.4 million (HK$34.4 million), including outstanding convertible debentures of US$3.75 million, a 15 percent redemption premium and interest. Kin Don reported debts of HK$135.5 million at May 31, including HK$79.7 million in secured loans and HK$55.78 million in unsecured loans that it is unable to settle. On Nov. 24, the company announced that it intends to use a credit of HK$84.6 million arising from a proposed capital reduction and 10-for-1 stock split to eliminate part of its accumulated losses. The company also proposes to reduce its paid up capital and par value to 1 HK cents per share from 10 HK cents by the cancellation of 9 HK cents paid up capital on each issued share. LUCKY DAY LTD: Facing winding up petition ----------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing on January 9, 2001,on the petition of Po Sang Bank Limited for the winding up of Lucky Day Limited. A notice of legal appearance must be filed on or before January 8. XINJIANG SHIYUE TRACTOR GROUP : Debt-equity swap ------------------------------------------------ China Huarong Asset Management Corporation recently signed an agreement with the Xinjiang Guanghui Enterprise (Group), a private company based in the Xinjiang Uygur Autonomous Region, to sell its RMB115 million (US$13.9 million) equity rights in the Xinjiang Shiyue Contractor Manufacturing (Group) Co Ltd to Guanghui for 5% more than the original purchase price. The first RMB52.9 million (US$6.4 million) has entered Huarong's account, Huarong announced Monday. "This is the first time for an asset management corporation to sell their equity rights at higher-than-actual value." The country's largest asset management company (AMC), Huarong was created by the state last year together with the Cinda, Great Wall and Orient AMCs, to deal with the mounting non-performing assets of the country's four largest state-owned commercial banks, the Industrial and Commercial Bank of China, the China Construction Bank, the Agricultural Bank of China and the Bank of China, respectively. After taking over the equity rights, Xinjiang Guanghui, with capital assets of over RMB4 billion (US$482 million) will inject RMB200 million in Shiyue in technical upgrading and to develop new business. Guanghui officials were quoted in the Huarong release as saying that the new methods will play a significant role in Shiyue's future development. In addition, the Asset Management Company Provisions recently issued by the State Council will facilitate the reviving of non-performing assets, said a Huarong spokesman who prefers to remain unnamed. According to the provisions, AMCs are legally allowed to transfer their equity rights in enterprises to investors at home and abroad or to sell the equity rights back to the enterprises. "The recent equity rights transfer marks a successful start in our disposing of non-performing assets," said the spokesman. By the end of November, Huarong had made RMB860 million (US$103.6 million) on its Shiyue Tractor Group assets, he said. (China Web 12-Dec-2000) ========= J A P A N ========= CHIYODA CORP.: 1H group net loss seen at 4.3B yen ------------------------------------------------- Troubled Japanese plant engineering company Chiyoda Corp. incurred an estimated group net loss of 4.38 million yen for the period April-September, larger than the previous forecast of 3 billion yen. The firm's consolidated recurring loss is estimated at 3.057 million yen for the first six months of fiscal 2000 -- more than twice the 1.5 billion yen estimated previously. The company increased its appraisal losses on shareholdings to 1.6 billion yen to ensure the completion of its rehabilitation program, according to company officials. The losses were reported as nonoperating losses. CHIYODA MUTUAL LIFE: Tokai unionists seek pension losses -------------------------------------------------------- Trade unionists at Tokai Bank are demanding compensation for potential losses on premiums they paid for pension plans with failed Chiyoda Mutual Life Insurance Co. Many employees at the bank took out insurance or pension plans sold by Chiyoda Mutual because the insurer's strategy was to sell policies to the bank's employees and corporate borrowers. The bank effectively encouraged pension plans with Chiyoda by paying out "incentive money" for employees to do so, the unionists claimed. Chiyoda asked the Tokyo District Court on Oct. 9 to protect its assets from creditors under the special rehabilitation law, which gives a company time to rehabilitate itself. Court-appointed administrators may require the insurer to cut back on some of its insurance and pension plans while demanding that guaranteed yields on various insurance products -- the yield that an insurer promises to earn from collected premiums in order to discount premiums -- be reduced. Tokai Bank has denied any responsibility for losses that might be incurred by employees or corporate borrowers who took out insurance or pension plans from Chiyoda. The unionists are members of a Tokai unit of an umbrella labor union. (Japan Times Online 12-Dec-2000) KUMAGAI GUMI CO.: Struggles to 6-mo. loss MITSUI CONSTRUC.CO.: Struggles to 6-mo. loss SATO KOGYO CO.: Struggles to 6-mo. loss -------------------------------------------- Seven out of nine struggling Japanese general contractors posted consolidated net losses for April-September, booking heavy losses as a result of market-based valuation for their asset holdings. According to results made available by Friday, Kumagai Gumi Co. and three others suffered negative net worth on a consolidated basis. Kumagai Gumi suffered a special loss of 414.1 billion yen, the biggest among them, after it wrote off massive nonperforming assets.It asked Sumitomo Bank and other creditors to forgive debts worth 450 billion yen. Mitsui Construction Co. is poised to request a debt waiver of 100 billion yen. Sato Kogyo Co. saw its consolidated recurring profit nearly wiped out by 3.2 billion yen in appraisal losses on its golf course memberships. Tobishima Corp. racked up a consolidated net profit of 54 million yen thanks to successful sales and rationalization efforts. But the profit is far too small for a company with consolidated revenue of more than 100 billion yen. Hazama Corp., forgiven debts worth a total of 105 billion yen by Dai-Ichi Kangyo Bank and other creditors, received sales support from banks, with most of its order receipts coming from clients introduced by banks. For Sato Kogyo and Tokyu Construction Co., orders from companies introduced by banks and group firms accounted for about 20 pct of total receipts. (Jiji Press English News Service 08-Dec-2000) ========= K O R E A ========= FIRST FIRE & MARINE: Accused of setting up illegal fund ------------------------------------------------------- The Financial Supervisory Service is probing First Fire & Marine Insurance Co. for charges that the nonlife insurer has set up an illegal offshore fund worth tens of billions of won, an FSS official said yesterday. "First Fire & Marine Insurance is suspected of making overseas investments out of the illicit offshore fund and thus incurring a loss of around 10 billion won," said Lim Jae-young, director of FSS Second Insurance Investigation Bureau. FSS inspectors are checking whether the insurance company has violated the Foreign Exchange Control Law in the course of managing the offshore fund and making overseas investments, he said. Lim said that the insurance company had suffered the loss by investing fund money in Russian bonds, real estate and domestic stocks. First Fire & Marine failed to report the creation of the offshore fund to the financial watchdog and record it on its accounting books, the official said. The official said that it is not easy to confirm the charges because it involves offshore transactions, but the watchdog will conclude its investigation within this week. On Nov. 28, the FSS requested the Justice Ministry to impose an overseas travel ban on First Fire & Marine Chairman Lee Dong-hoon and six former and incumbent executives. The official said that FSS investigators had detected the loss by First Fire & Marine Insurance during a regular audit into the company's insolvency. He added that Chairman Lee Dong-hoon is also suspected of embezzling part of the offshore fund. Lee is a son of Lee Hoo-rak, former head of the Korea Central Intelligence Agency, or the predecessor of the National Information Service. The FSS has taken "prompt corrective action" against the non-life insurance company due to its liquidity crisis, under which the company is required to put forward a rationalization plan to turn itself around. Meanwhile, First Fire & Marine Insurance said that it had established the offshore fund in 1996 as part of its asset management strategy and incurred the loss due to Russia's growing economic problems. The offshore fund has bee set up in accordance to due legal procedures and Chairman Lee has not diverted any of the fund money, the company alleged. (Korea Herald 12-Dec-2000) HYUNDAI GROUP: Close to selling Sunshine Plaza stake ---------------------------------------------------- Problems at home of South Korea's largest chaebol, the Hyundai group, are forcing its main business arm here to sell off its stake in a property in the Central Business District to its joint venture partner, City Developments. Hyundai Engineering & Construction is close to selling its 40 percent stake in Sunshine Plaza at the corner of Bencoolen Street and Prinsep Link, to listed CDL, which already owns the other 60 per cent. The price is not known but the total cost of the office, retail and residential project is said to be some $200 million, including $104 million for land and $62 million for construction. Sunshine Plaza is a mixed development on a 6,300 sq m 99- year leasehold plot comprising four 12-storey blocks. An office block takes up 7,100 sq m of space with retail space taking up 3,600 sq m and 301 carpark lots taking up 12,800 sq m. It also includes three residential blocks with 160 apartments - 18 one-room units, 64 two-room units and 78 three-room units. It also has a swimming pool, a clubhouse and a tennis court. The apartments are said to have sold very well and so the purchase price will have to reflect payments already received. The Korean company, which is under intense pressure from its creditors, to whom it owes more than US$4.6 billion (S$8 billion), is said to have placed out its stake in the Singapore property several months ago. (Business Times 08-Dec-2000) MIJU STEEL MFG.CO.: Creditors OK payment rescheduling ----------------------------------------------------- Creditors of Miju Steel Manufacturing Co have agreed to reschedule payments and cut rates on the troubled company's debt. They also will issue convertible bonds on the loans. The actions came at a creditors meeting at Seoul Bank headquarters. Twenty-two creditors agreed to postpone the steelmaker's debt repayment until 2003 and cut interest rates on the loans from the current 9.5-9.7 percent per annum, by 2-3 percent. They also agreed to issue and underwrite convertible bonds on their lending amounting to 21.7 billion won to the troubled company. SAMSUNG COMMERCIAL: Parts suppliers cut off supply stream --------------------------------------------------------- A total of 226 primary parts suppliers to Samsung Commercial Vehicles told reporters Monday that they will suspend the supply of after-service parts to the troubled firm, which has been taking steps to liquidate since being identified by the government as one of the nonviable firms to be liquidated back on November 3. The owners of about 20,000 commercial vehicles made by Samsung currently on the roads could be affected as a result. The decision will also undermine the credibility of Samsung Commercial Vehicles in overseas markets, as it will not be able to continue to provide after-service for about 20,000 vehicles it has already shipped abroad. Representatives of the suppliers said they decided to suspend supply of after-service parts after realizing that Samsung would not be compensating them for the approximately W300 billion in losses they expect to incur after the firm's liquidation. (Digital Chosun 11-Dec-2000) SAMSUNG COMMERCIAL: Court declares it bankrupt ---------------------------------------------- The Taegu district court has declared Samsung's commercial vehicle operation bankrupt, selecting two bankruptcy administrators as well. In the bankruptcy ruling, the court said the commercial vehicle operation was incapable of paying its debt, as its assets were outweighed by about 11.8 billion won, and aggregate deficits had reached 450.2 billion won. The court also noted that the consultative body of creditor banks on Nov. 3 designated the commercial vehicle operation as a close-down target. Liquidation procedures will start from March 14 next year when creditors will call a meeting to look into provable claims. SAMSUNG MOTOR: Parent group won't cover all its debt ---------------------------------------------------- Subsidiaries of Samsung Group have reportedly decided that they will not cover any shortfall between the donation of 4 million shares of Samsung Life that will go towards paying off the debts of Samsung Motor and the total amount owed to creditors. Back in June 1999, group founder and chair Lee Kun-hee personally donated 3.5 million shares of Samsung Life, worth W2.45 trillion, going by their estimated value of W700,000 per share at the time of the donation. Around the same time, Samsung Group also committed itself to contributing an additional 500,000 shares it owned of the insurance firm if Lee's donation did not fully cover the debt. Another 31 subsidiaries of the group had also committed to covering interest payments and any other shortage if the above total of 4 million shares failed to cover Samsung Motor's debt, but they have, according to sources, decided not to do so. A high-ranking official at Samsung said the group believes that the 4 million shares of Samsung Life should be enough to cover the debt, adding that if the total value of the shares does fall short of the amount of debt, creditors should contribute to making up the difference. (Digital Chosun 11-Dec-2000) SKM: Banks to track personal wealth of owner -------------------------------------------- The Financial Supervisory Service yesterday ordered creditors of SKM, a company which went bankrupt Nov. 20, to track the personal wealth of Chey Jong-wook, its owner, and take legal action against him. The FSS move was based on its findings that Chey, an uncle of SK Group Chairman Chey Tae-won, intentionally let the company go bankrupt to avoid the obligation to repay 59 billion won owed by SKM's subsidiary Dongsan C&G. Chey refused assistance from the creditors - Kookmin, Korea Exchange, Cho Hung and Korea Development banks - and applied for court protection after defaulting on SKM debts. Regarding Chey's behavior as a typical case of the moral hazard problem facing an unethical company owner, the FSS told creditors to trace his personal wealth, refer him to the prosecution and take stern legal action against him. The FSS said it cannot track Chey's personal wealth on its own because it does not have to right to investigate individual companies. It told creditors to look into SKM's ownership of the Century 21 Country Club and the duty free shop at the Sheraton Walker Hill to find out whether these are actually Chey's personal assets. If Chey is found to have concealed his wealth using the company as a cover, creditors will refer him to the prosecution on charges of neglect of duty of care. Meanwhile, the financial watchdog issued a warning to the creditors for their failure to detect problems at SKM when they screened it during a comprehensive review of the credit risk of their corporate clients in October. The creditors did not include SKM in the list of 52 nonviable companies announced Nov. 3. Formerly called SK Magnetic, SKM originated from the SK Group. (Korea Herald 12-Dec- 2000) =============== M A L A Y S I A =============== MALAYSIAN AIR LINES: White knight SairGroup steps forward --------------------------------------------------------- SWISS aviation conglomerate SAirGroup said yesterday it was interested in a stake in Malaysian Airline System after all, having denied such a possibility on Sunday. "Something has changed over the weekend. We have started the due diligence process for a financial stake in MAS," spokesman Urs Peter Naef said yesterday, adding this process could take several months. On Sunday, he had denied interest in a financial stake and dismissed a report the airline had started a due diligence audit of the Malaysian flag carrier. MAS sources in Kuala Lumpur said SAirGroup was carrying out its second round of due diligence. "We have set up a special room for them to inspect our accounts," said a highly-placed source. Air France and KLM have withdrawn their interest for a stake in MAS, which had left Australia's Qantas the only declared willing buyer following Swissair's initial retreat. Mr Naef declined comment on the size of the stake SAirGroup's airline unit Swissair was willing to take in MAS. MAS chairman Tajudin Ramli, a main shareholder, told the New Straits Times recently that Swissair, KLM and Qantas were "deeply interested" in his 29 per cent stake in MAS. Swissair heads the Qualiflyer alliance and has stakes in a range of smaller European airlines and a code-sharing deal with AMR Corp's American Airlines. (Channel News Asia 12- December-2000) PSC INDUSTRIES Revamp proposed over five years ----------------------------------------------- PSC Industries Bhd (PSCI), with an outstanding debt of about RM580 million has proposed a debt restructuring scheme which will see the company with almost no gearing in the next five years. The company said its gearing ratio will fall to 0.15 times with total borrowings of about RM137 million by the middle of 2005, upon completion of the scheme which comprises cash settlement and conversion of redeemable convertible loan stocks (RCLS). PSCI, which is involved in the capital- intensive shipbuilding, marine engineering and defence industries, is in debt with 13 banks in the country. The debt was incurred when it acquired shipbuilding technologies, capabilities and facilities. PSCI has been awarded the Offshore Patrol Vessel Contract of RM5.35 billion by the Government. The group has received its initial mobilisation advance payment amounting to RM1.07 billion. Under its debt restructuring scheme, PSCI has proposed: * a cash settlement of about RM73.72 million to OCBC Bank (Malaysia) Bhd; * a conversion of about RM34.69 million to Bank Islam Malaysia Bhd into 4.082 million new shares of RM1 each in PSCI at an indicative price of RM8.50 per new share; * a conversion of about RM426.668 million of bank borrowings inclusive of interest capitalised owing to a consortium of secured creditors into 50.196 million new RCLS A at an indicative price of RM8.50 debt to RM1 nominal value of RCLS; * a conversion of about RM46.338 million of bank borrowings inclusive of interest capitalised owing to a consortium of unsecured creditor banks into 5.452 million RCLS B at an indicative price of RM8.50 debt to RM1.00 nominal value of RCLS, and * a conversion of about RM22.259 million yield on RCLS A/B into 2.619 million new shares of RM1 each in PSCI at an indicative issue price of RM8.50 per new share of RM1 each in PSCI. The scheme will provide settlement of the PSCI group's financial obligation to creditors on equitable terms as they will receive full repayment in principal and interest. "The scheme is a win-win situation for both parties and the creditors will not experience a hair cut," PSCI said. The proposed debt restructuring will also allow PSCI to return to a sound financial footing. The scheme, according to PSCI, will recapitalise the group commensurate with the RM5.35 billion defence contract in hand. The proposed scheme will not have any material effect on group earnings for the financial year ended December 31 this year. It will improve the future earnings of PCSI as the group will benefit from annual interest savings at a minimum of RM50 million a year based on the average current interest cost of 10 percent per annum. Assuming the full conversion of RCLS into new shares, PSCI said the shareholding of Business Focus Sdn Bhd and Datuk Amin Shah Omar Shah would be diluted to 30.66 per cent from the current 45.8 percent. PSCI will also ensure that there are no substantial changes in the respective shareholding structure. Therefore, it said, Business Focus and Amin Shah would be obliged to restore their controlling to more than 33 percent in PSCI by acquiring new ordinary shares and/or RCLS A/B. The company has also proposed a bonus issue of about 79.129 million new shares of RM1 each on the basis of one-for-one to increase its capital base commensurate with the RM5.35 billion contract undertaken by the group. PSCI has also proposed a private placement of up to 15.825 million new shares of RM1 each in PSCI, representing not more than 10 percent of the enlarged issued and paid-up share capital pursuant to the bonus issue. The company said proceeds from the proposed private placement would be used to finance working capital and to defray the PSCI debt restructuring expenses and incidental costs. (New Straits Times 08-Dec-2000) UNITED ENGINEERS MALAYSIA: Shares continue to fall -------------------------------------------------- United Engineers Malaysia Bhd. shares fell as much as 4.4 percent after the nation's largest builder said it accepted its vice chairman Halim Saad's offer to defer over two years payment for his purchase of a stake in Renong Bhd. Yesterday, Halim offered to buy 31 percent of Renong from United Engineers, or UEM, for 3.16 billion ringgit ($833 million), exercising an option due in February to buy the stock of the country's most indebted group. Halim said he will pay 300 million ringgit between February and December next year and the rest in May 2002, effectively buying time. The agreement "postpones the problem," said Terence Wong, an analyst at GK Goh Research. UEM was supposed to have been paid in February, he said, maintaining his "underperform" recommendation on the stock. UEM shares fell for a third day, losing as much as 16 sen, or 4.4 percent, to 3.46 ringgit, its lowest level since May 17, 1999. It recently traded at 3.56 ringgit. It has fallen 33 percent in the past month, making it the worst-performing stock on the benchmark Composite Index as investors steered clear of the company on concern it wasn't protecting the rights of minority investors. The postponement in payment may make it difficult for UEM to repay 8.3 billion ringgit of debt. The company's latest announcement comes close on the heels of its plan last month to use new shares to buy $1.76 billion in assets from parent Renong, strengthening Halim's hold over the company at the expense of minority shareholders. The asset shuffle reinforced investor concern that UEM is being called upon for a second time in three years to help Renong and its controlling shareholder, Halim, strengthen their hold on the group. The plan, along with other related proposals, would raise Halim's stake in Renong to 69 percent from 16.5 percent. It would raise Renong's UEM stake to 54 percent from 38 percent, while diluting minority shareholders' stakes by a quarter. In November 1997, UEM angered minority investors when the company, through borrowings, bought 32.6 percent of Renong for 2.34 billion ringgit, or 3.24 ringgit per share, at a 12 percent premium to Renong's price at that time. UEM shares plunged 38 percent after the announcement because investors saw it as a move to support Renong's shares. To appease investors, UEM was granted an option to call on Halim to buy back those shares at the same price plus costs. That option expires on Feb. 14, 2001. (Bloomberg 12- Dec-2000) ===================== P H I L I P P I N E S ===================== PHILIPPINE TEL.& TEL.CORP: Creditors OK debt-equity swap -------------------------------------------------------- Philippine Telegraph and Telephone Corp. (PT&T) has increased its capital stock to accommodate creditor banks that approved a debt-equity scheme involving one-third of its P8.9-billion (US$177.8 million) debt. PT&T said its board of directors has yet to determine the amount of the capital stock hike upon the signing of the definitive debt restructuring agreement. =============== T H A I L A N D =============== THAI PETROCHEM.INDUS.: Court postpones rehab plan nod ------------------------------------------------------ The battle to rehabilitate Thailand's most indebted company -- Thai Petrochemical Industry (TPI) - will continue to be waged awhile longer as the Central Bankruptcy Court postponed a decision on a restructuring plan approved by creditors. The Court said it would not consider the case until the Supreme Court ruled on a petition filed by the firm's management, which is seeking to have the matter heard by a new panel of judges. TPI chief executive Prachai Leophairat's victory was the latest in a long line of legal manoeuvres that have caused lengthy delays in efforts to reform Southeast Asia's largest petrochemical firm. About 1,000 disgruntled TPI employees staged a rally outside the court Tuesday as the bench prepared to rule on the restructuring plan, which they fear will mean layoffs for some of the company's 20,000 workers. Creditors including foreign and local banks last month approved the plan to restructure the company's 3.2 billion dollar debt mountain, but the courts must endorse the proposal before it can be implemented. THAI TELE.TELECOMM.: Expecting Bt4.5B annual net loss ----------------------------------------------------- Thai Telephone Telecommunication Plc is expected to report a net loss of 4.5 bln baht in 2000, a loss of 687 mln baht in 2001 and a return to profit in 2002, said KGI Securities One Research. In a report the broker said the lower loss (in 2001) should be due to the improving operations as well as a foreign exchange gain in 2001. "However, we expect the company to show a net profit in 2002 due to its improving financial position mainly as a result of success in its debt restructuring planning," it said. It recommended a "buy" on the shares. TTNT's debt restructuring plan is expected to be completed in December and the broker foresees few changes to the current plan. Under the plan, it expects TTNT to issue 1.362 bln new shares to facilitate a debt-to-equity swap of 6.8 bln baht, which will go to existing shareholders who are creditors, including Jasmine International, Loxley and Ital-Thai Development. The plan also requires TTNT to place shares with a new strategic partner and it is in talks with several potential candidates, both local and foreign, the report said. The debt to equity ratio for end-2001 should fall to 4.2 times, down from 15.1 times in 2000, it said. The broker forecast a 4 percent rise in subscriber numbers year-on-year at end-2001 to 1.24 mln. "Despite tougher competition from the Telephone Organisation of Thailand (TOT), TTNT should be able to grow its subscriber base. In Oct 2000, the total subscriber base was 1.19 mln. "Our end-2001 target for the share price is 7 baht. This is based on a net present value (NPV) with a 13 pct discount rate. We assume the price for debt-to-equity swap at 5 baht each (the average market price for the last 180 days). If the swap price is 10 baht, the target price rises to 9 baht from 7 baht. We have not factored in a new partner in our valuation," the report said. (AFX (AP) 08-Dec-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, James Philip P. Jover and Maria Vyrna Ni�eza, 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. 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