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/raid1/www/Hosts/bankrupt/TCRAP_Public/980209.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 Monday, February 9, 1998, Vol. 1, No. 2 Headlines C H I N A MANSION HOLDINGS: Coopers & Lybrand Evaluating Liquidity H O N G K O N G PERIGRINE INVESTMENTS: Liquidation May Take Years PERIGRINE INVESTMENTS: BNP Confirms Intent to Acquire PERIGRINE INVESTMENTS: Jardine Fleming to Buy Unit WHARF HOLDINGS: Posts $173.5 Million Bond Pending Appeal WHARF HOLDINGS: Moody's to Review Debt for Downgrade I N D I A AIR INDIA: Facing Crisis, Cutting Loss-Making Routes ANZ GRINDLAYS: Rs 9 billion Judgment Awarded to NHB I N D O N E S I A CE INDONESIA: Bank Debt Downgraded to Caa1 DSPL FINANCE: Capital Market Project Financing Downgraded MNL INDONESIA: Bank Loan Facilty Downgraded to Caa1 P.T. PAITON: Capital Market Project Financing Downgraded PERTAMINA: State Oil Firm Unable to Pay U.S. Tanker Rates J A P A N HITACHI LTD.: Reorganizing Business Units JET TOUR: Files for Bankruptcy KANKAKU SECURITIES: Mortgaged Convertibles Downgraded MITSUI GROUP: 99 Personal Injury Suits Top 3 Billion Yen SAISON GROUP: To Sell Intercontinental Hotel to Reduce Debts SANKO STEAMSHIP: Repays All Debts Under Court Protection TOHO MUTUAL: GE Capital Undertaking Bailout YAMAICHI SECURITIES: Regulators Had Knowledge of Losses YAMAICHI SECURITIES: Suit says Yamaichi faked documents K O R E A DAEWOO GROUP: General Motors in Partnership Talks DON WON PURE CHEMICALS: Sumitomo Chemical Taking 90% Stake HYUNDAI GROUP: Balking at "The Big Deal" with Samsung LG-CALTEX OIL: S&P Revises Rating to CreditWatch Dev RAS LAFFAN: S&P Issues Negative Implication Rating SAMSUNG GROUP: Restructuring Plans Detailed SAMSUNG ELECTRONICS: Studying "The Big Deal" with Hyundai SAMYANG FOODS: Noodle Maker Files for Court Protection SUKWANG: Leading Fashion Maker Files for Court Protection N E W Z E A L A N D BENMORE PRODUCTS: Interim payment to Benmore creditors SMITHS CITY: Receivership Noteholders May Choose Equity P H I L I P P I N E S FINANCIERA MANILA: Seeks Relief from Debt Payments MARCOPPER MINING: Laying Off Majority of Workers NEGROS NAVIGATION: New Investments May Avert Bankruptcy PETRON CORP.: Posts Loss and Can't Increase Revenues VITARICH CORP.: Signs Deal with Creditors S I N G A P O R E SEMBAWANG CORPORATION: Shares Drop to Nine-Year Low T H A I L A N D ALPHATEC ELECTRONICS: To Pay 5% to Compromise US$330 Million SIAM CEMENT: Posts Massive 1997 Foreign Exchange Losses T U R K E Y MARTI SHIPPING: 10% Cash Proposal Plus Stock to Creditors ========= C H I N A ========= MANSION HOLDINGS: Coopers & Lybrand Evaluating Liquidity -------------------------------------------------------- Mansion Holdings says it is experiencing liquidity problems and will have difficulty servicing hundreds of millions of dollars in bank borrowings. Mansion said it had unaudited utilised bank loans and trade facilities amounting to $513 million as of December 15. Its unaudited cash balances at that date were $26 million. Trust receipt loans and other bank loan repayments of $249.5 million had become overdue as of January 20. A further $110.5 million would become overdue within three months. This compared with the company's audited consolidated net tangible assets as at December 1996 of $291.7 million. Mansion said it was discussing a restructuring with bankers and had appointed Coopers & Lybrand as independent reporting accountants to evaluate its financial position and future cash flow projections. A report was due by the end of January or early February. The company said a mainland enterprise, China Success International Investment (Group), had agreed to subscribe for a $13.96 million secured note. The note was convertible into 87.28 million new shares, representing about 14.8% of the company's enlarged issued share capital. China Success is 80% owned by a mainland state-owned enterprise and 20% by an independent third party. (South China Morning Post) ================= H O N G K O N G ================= PERIGRINE INVESTMENTS: Liquidation May Take Years ------------------------------------------------- Price Waterhouse indicated last week that it may take up to five years "to sort it all out," in the liquidation of Perigrine Investments Holdings Ltd. Price Waterhouse spokespersons said that Perigrine has an exceptionally complex structure and lacks adequate financial records. (The Wall Street Journal 02-Feb-1998) PERIGRINE INVESTMENTS: BNP Confirms Intent to Acquire ----------------------------------------------------- Banque Nationale de Paris announced Monday it will buy the Greater China equity operations of Peregrine Investments Holdings Ltd., which went into bankruptcy last month. BNP's chief executive Didier Balme said the bank's securities arm, BNP PrimeEast, will acquire Peregrine's China unit, forming a new company called BNP Prime Peregrine Ltd. Balme wouldn't disclose the purchase price at a press conference in Hong Kong. He also said that BNP has shown interest in other parts of Peregrine, without giving further details. The deal will require the approval of Hong Kong's High Court, and regulatory authorities. Price Waterhouse, Peregrine's provisional liquidator, said separately that the proposed acquisition involves the transfer of about 150 Peregrine employees and gross assets with a value of about HK$290 million. Price Waterhouse said that it is in talks with parties interested in buying the remaining Peregrine businesses in Hong Kong and elsewhere. Balme said BNP and BNP Prime East will own 90% of BNP Prime Peregrine, and senior Peregrine executives will hold 10%. BNP Prime East is 70% owned by BNP and 30% by Singapore- based PrimePartners Group. PERIGRINE INVESTMENTS: Jardine Fleming to Buy Unit -------------------------------------------------- Hong Kong investment bank Jardine Fleming has emerged as the likely buyer of Perigrine Asset Management, the fund management arm of the failed securities company. PAM's bond fund is reportedly worth US$80 to US$100 million. Jardine declined to provide details of its on-going discussions with Price Waterhouse. (Financial Times 05-Feb-1998) WHARF HOLDINGS: Posts $173.5 Million Bond Pending Appeal -------------------------------------------------------- Wharf Holdings Ltd. of Hong Kong has posted a $173.5 million bond, pending appeal of a $155 million jury award it owes to United International Holdings Inc., a Denver-based international cable company, officials at UIH announced. UIH won a federal jury award in Denver last year against Wharf after a joint business venture in Hong Kong went awry. Until now, Wharf has declined to post bond in the case, facing interest fines of up to $50,000 a day and a potential contempt of court citation. By posting the bond, collection of the award is stayed, pending Wharf's appeal to the U.S. Court of Appeals for the 10th Circuit. (The Denver Post) Standard & Poor's, in turn, lowered the long-term ratings of Wharf (Holdings) Ltd. and guaranteed entities to single-'A'- minus from single-'A'. At the same time, the ratings were placed on CreditWatch with negative implications. The downgrade, S&P said, reflects increasing risks in Wharf's financial profile, in terms of both a rising debt burden brought about by higher domestic interest rates as well as worsened earnings prospects in the company's core businesses. S&P added that the current downturn in the Hong Kong property market is adversely affecting Wharf's property businesses. Prices of new property developments continue to fall. Meanwhile, a prolonged recession could have more serious implications for the company's investment property business, where Wharf has a large exposure to office and retail properties. These factors come on top of existing difficulties in the company's pay television operation, Wharf Cable. The latter company has recorded substantial losses in the past few years, and has yet to break even on a cash basis. Ongoing litigation in the U.S. could also have a minor impact on Wharf's business and finances, S&P said. Rising interest rates in Hong Kong are increasing Wharf's debt burden, as almost two-thirds of its debt carries floating interest rates and is denominated in Hong Kong dollars. The company's interest coverage is weak compared to its peers. Net rental income covered interest expenses by about 2.5 times in December 1996; this ratio is expected to worsen in coming years as a result of higher interest expenses and a gradual slowdown in rental income. The ratio of funds from operations to total debt, at about 20%, is below that of rated peers; this figure is also expected to decrease over the next several years in connection with rising debt and lower earnings. WHARF HOLDINGS: Moody's to Review Debt for Downgrade ---------------------------------------------------- Moody's Investors Service, Inc., announced last week that it would review its ratings on US$1.2 billion of debt issued by Wharf (Holdings) Ltd. for a possible downgrade. ========= I N D I A ========= AIR INDIA: Facing Crisis, Cutting Loss-Making Routes ---------------------------------------------------- Faced with an acute financial crisis, India's state-owned international carrier Air India has decided to restructure its services, concentrating only on profit-making routes while discontinuing many of its existing loss-making international flights. Addressing a press conference, the carriers managing director, M P Mascarenhas said Air India would discontinue its services from South Korea, where the company was incurring huge losses because of the recent currency crisis affecting South-East Asian countries, and Japan, from where earnings were declining due to the decrease in tourist traffic and fluctuating yen. (Asia Pulse) ANZ GRINDLAYS: Rs 9 billion Judgment Awarded to NHB --------------------------------------------------- A special Indian court has directed international bank ANZ Grindlays to pay Rs 9.06 billion ($US236.55 million) with 18 per cent interest to the National Housing Bank (NHB) of India, setting aside an arbitration award relating to a securities scam conducted in 1992. The transactions in question pertain to cheques drawn by NHB in favour of ANZ Grindlays and handed over to Harshad Mehta, the prime suspect in the operation, who convinced ANZ to deposit the proceeds into his own account with Grindlays bank. (Asia Pulse) ================= I N D O N E S I A ================= CE INDONESIA: Bank Debt Downgraded to Caa1 ------------------------------------------ Moody's has rated the bank loan facility extended to independent power project CE Indonesia Funding Corp at Caa1 concluding that the continued devaluation of the Rupiah poses a significant threat of default. DSPL FINANCE: Capital Market Project Financing Downgraded --------------------------------------------------------- Moody's has rated the capital market project financing facility extended to independent power project DSPL Finance Company B.V at Caa1, concluding that the continued devaluation of the Rupiah poses a significant threat of default. MNL INDONESIA: Bank Loan Facilty Downgraded to Caa1 --------------------------------------------------- Moody's has rated the bank loan facility extended to independent power project Indonedia Funding Corporation at Caa1, concluding that the continued devaluation of the Rupiah poses a significant threat of default. P.T. PAITON: Capital Market Project Financing Downgraded -------------------------------------------------------- Moody's has rated the capital market project financing facility extended to independent power project P.T Paiton Energy Funding at Caa1, concluding that the continued devaluation of the Rupiah poses a significant threat of default. PERTAMINA: State Oil Firm Unable to Pay U.S. Tanker Rates --------------------------------------------------------- Amid growing signs that the currency crisis is paralysing the Indonesian economy, state oil company Pertamina is defaulting on US dollar charter hire payments to foreign tanker owners, it emerged last week. Pertamina, which often has up to 60 vessels on charter, has told at least three foreign owners it cannot pay the daily US dollar rate for tankers on charter in the past couple of weeks. The news comes as the oil company announced yesterday it was ceasing oil product imports in March to help stop the dramatic drain on its foreign currency reserves. "We expect to import half of our monthly average of 150,000 bpd in February and we expect zero imports in March, Pertamina processing manager," Samto Utomo, was quoted as saying. The international shipping community is watching the currency crisis in Indonesia closely as the country depends heavily on US dollar denominated purchases of shipping services such as hull and P&l cover, repairwork, survey work and legal fees. Concern has been expressed among some P&l Clubs over Indonesian owners' ability to pay for cover in US dollars during the current P&l cover renewal season. The dramatic slide in the Indonesian rupiah has seen the currency slump to around 10,000 to the US dollar recently against Rs6,000 just three months ago. The fall in the rupiah has left Pertamina perilously short of US dollar funds as it uses ever increasing amounts of rupiah to purchase the US currency needed for its international trading. It has asked several tanker owners if it can make payments for charters in rupiah instead of US dollars in the past couple of weeks. Jakarta shipping sources told Lloyd's List that the request has dismayed owners. This has happened to owners with long- standing relationships with Pertamina, and several are now considering withdrawing their vessels from Pertamina charters, one source said. It is understood that Greek tanker operators have been particularly affected by Pertamina's currency problems. But other owners have apparently accepted rupiah terms for charter hire recently in the hope of capitalising on the wild swings the currency has undergone in the past month. A lawyer acting for one of the affected owners confirmed to Lloyds List that Pertamina had defaulted on US dollar charter hire payments in January. "We cannot say whether these are isolated incidents or if it is company policy. Whatever the case, the market realises Pertamina is enduring a tough time due to the currency problems and owners should be aware of that," the lawyer said. Oil traders quoted yesterday said Pertamina was cutting down on imports of crude oils from China, Australia and Malaysia, but would go ahead with imports from Saudi Arabia and Iran which were purchased on government to government based term contracts. Industry sources said that for this month, all spot market imports had been cancelled except for one cargo from Kuwait for 80,000 tonnes of diesel and 50,000 tonnes of kerosene. There is mounting speculation that Pertamina is more than US$300m in debt to its affiliate companies which buy and sell oil and products on its behalf. But the suggestion was denied by the company president-director Mr Soegianto who maintained the oil giant had no difficulty making all its repayments. Soegianto noted that the Indonesian government had suspended its US dollar outflow wherever possible during the crisis to keep dollars in the country. As a state-owned entity, Pertamina had to follow this policy, he added. (LLoyd's List International) ========= J A P A N ========= HITACHI LTD.: Reorganizing Business Units ----------------------------------------- Japan's Hitachi Ltd., moving to strengthen its multimedia business, said Thursday it will reorganize its business into three new groups. Hitachi, the country's largest electric- machinery maker, said it will have an information systems group, information media systems group and consumer products group, effective February 21, 1998. JET TOUR: Files for Bankruptcy ------------------------------ Jet Tour, one of Japan's leading travel operators, is to file for bankruptcy with liabilities of approximately Y27 billion (US$214 million). The company has insufficient cash to pay Y1.9 bn due last Tuesday for airline tickets. Sanwa Bank is known to be Jet Tour's primary lender. (Financial Times 05-Feb-1998) KANKAKU SECURITIES: Mortgaged Convertibles Downgraded ----------------------------------------------------- Mortgaged convertible bonds No. 3, 4 and 5 issued by Kankaku Securities Co. were downgraded to 'BB+' from 'BBB-' last week by Japan Credit Rating Agency Ltd. MITSUI GROUP: 99 Personal Injury Suits Top 3 Billion Yen -------------------------------------------------------- A group of former miners from the closed Miike Mines and their families filed suit against three Mitsui group companies in Fukuoka late last week. The miners seek compensation, saying the companies failed to protect workers from a debilitating lung disease. The 99 people who are suing Mitsui Mining Co., Mitsui Mining & Smelting Co. and Mitsui Construction Co. are seeking about 3.05 billion yen in compensation. The suit claims that the companies failed to take sufficient measures to protect workers from contracting pneumoconiosis, a category of lung ailments that includes Black Lung disease. The plaintiffs represent the second group of former Miike Mine workers to file suit against the mine's operators for negligent management. The group is arguing that massive amounts of dust particles in the Miike Mines in Fukuoka Prefecture, which were owned by Mitsui Mining and Mitsui Mining & Smelting, caused them to contract varieties of pneumoconiosis. Fourteen of the plaintiffs performed subcontracting work at the mines for Mitsui Construction. Each of the plaintiffs would receive up to 33 million yen if their case succeeds. The plaintiffs' lawyers said that ailments from working at the mines had made it difficult for many of their clients to get new jobs after the Miike Mines closed in March last year. The lawyers also threatened to pursue further action if the companies were not willing to come to a settlement. Miike Mines were operated from 1932 until the end of March 1997. (Mainichi Daily News) SAISON GROUP: To Sell Intercontinental Hotel to Reduce Debts ------------------------------------------------------------ The Saison Group of Japan, headed by business tycoon Seiji Tsutsumi, is to sell the Intercontinental Hotel and Resorts chain, withdrawing from the hotel business, news reports said Wednesday. The sale of the hotel chain, which Saison bought in 1988 for 280 billion yen (2.2 billion dollars), will help the group pare down its huge debts, the Nihon Keizai Shimbun said. Supermarket chain Seiyu Ltd., a core company of the Saison Group, has consolidated debt of 1.23 trillion yen (9.8 billion dollars). Prospective buyers of the chain include Marriott International and Holiday Inn, the daily said. Saison Group originally planned to list the hotel chain on the New York exchange later this year to raise funds, according to the Nihon Keizai. But the size of debts of group companies such as Tokyo City Finance, Seiyu's nonbank unit, means that a complete sale of the hotel group would be preferable, the newspaper said. (AFP) SANKO STEAMSHIP: Repays All Debts Under Court Protection -------------------------------------------------------- Sanko Steamship Co., which is under court protection, has completed loan repayments worth 51.50 billion yen ($405 million) before the planned 2007 repayment date, the Nihon Keizai newspaper said, citing a company statement. Sanko reported the repayment this past week and asked the Tokyo district court for approval to end its rehabilitation period. Sanko Steamship applied for court protection from creditors in August 1985 with 677.8 billion yen in liabilities, the paper said. (Nihon Keizai and Bloomberg News) TOHO MUTUAL: GE Capital Undertaking Bailout ------------------------------------------- Toho Mutual Life Insurance Co. will establish capital ties with GE Capital Services, the world's largest nonbank, the Nihon Keizai Shimbun Wednesday morning edition reports. The deal will bring the financially troubled midsize life insurer under the General Electric group. The companies have agreed to form a Japanese joint venture to sell life insurance and manage pension funds. GE Capital will be the majority owner in the venture, with its investment estimated to be tens of billions of yen. (Asia Pulse) YAMAICHI SECURITIES: Regulators Had Knowledge of Losses ------------------------------------------------------- A former Japanese Finance Ministry bureaucrat says that he knew in 1991 about the hugh losses mounting at Yamichi Securities Co. That testimony was presented last week to Japanese lawmakers in televised sessions. The Tokyo District Prosecutors Office continues its investigations of scandals within the Japanese Finance Ministry. (The Wall Street Journal 05-Feb-1998) YAMAICHI SECURITIES: Suit says Yamaichi faked documents ------------------------------------------------------- A woman filed a lawsuit Monday against Yamaichi Securities Co. seeking 6 million yen in compensation for losses resulting from the brokerage's handling of her investment transactions. In the suit before Osaka District Court, the 50-year-old plaintiff accused Yamaichi officials of falsifying information so that she thought her dealings were turning a profit when they were not. The woman said she was advised by an official at Yamaichi's branch in Takatsuki, Osaka, to start the investment trust dealings in May 1996. By August of last year, she said she had committed 15 million yen for investment purposes. The plaintiff visited the branch in April and September last year to find out how her transactions were progressing. On both occasions, she said the official told her there had been no loss. The woman said the official showed her documents, which she learned later were fake. In October, the official informed her that the documents were not genuine, adding that the brokerage was certain "prices will rise." Last month, just prior to the announcement that Yamaichi was going under, the official and her boss told the plaintiff not to cancel the investment trust. They told her there was no problem with Yamaichi. After it was made official that Yamaichi had collapsed, the plaintiff learned that her investment trust had suffered a total of 5.5 million yen in losses, the petition said. (Asahi News) ========= K O R E A ========= DAEWOO GROUP: General Motors in Partnership Talks ------------------------------------------------- General Motors (GM) said Monday that it has reached agreement with South Korea's Daewoo Group to hold exclusive talks on establishing some sort of partnership. "This agreement represents a commitment by both companies to engage in intensive discussions to explore various options in a wide range of areas, both domestically and abroad," said Alan Perriton, president of GM's South Korean operations. "This means that GM and Daewoo will now sit down exclusively with each other and explore their common interests," GM spokesman Mike Meyerand said. GM also announced an arrangement, effective immediately, with Daewoo Motors Company (DWMC), to provide service for GM vehicles sold in South Korea. That accord follows a decision at the end of January by South Korea's Inchcape to terminate its service agreement with GM. Analysts said GM would consider making an investment in Daewoo only if it succeeds in securing a controlling interest of more than 20% in the debt-laden conglomerate. South Korean law currently prohibits majority ownership of domestic companies by a foreign firm. Some analysts seemed skeptical of the advisabiliity of GM's investing in Daewoo. "I don't know how to evaluate (the value of) a company that basically is bankrupt," said Kurt Brown, international automotive analyst with Boston-based Standard and Poor's DRI research firm, who regularly talks with GM officials. Brown said that five billion dollars was the rumored amount that GM is willing to pay for some sort of partnership with Daewoo. In trading last week, Daewoo shares lost ground amid the news with GM, falling to less than 7,200 won per share. DON WON PURE CHEMICALS: Sumitomo Chemical Taking 90% Stake ---------------------------------------------------------- Sumitomo Chemical Co. will raise its stake in a South Korean maker of highly purified chemicals to 90%, from the current 40%, at a cost of $US33 million, company officials have announced. Oriental Chemical Industries, a South Korean partner, will sell its 50% share as part of its restructuring program. Itochu Corp. holds 10% of the venture. Dong Won Pure Chemicals Co., set up in 1991, is currently managed by Oriental Chemical personnel. It is South Korea's largest supplier of purified chemicals for the semiconductor industry, and posted sales of 45.8 billion won in the year ended December. (Asia Pulse) HYUNDAI GROUP: Balking at "The Big Deal" with Samsung ----------------------------------------------------- South Korea's President-elect has recommended that Hyundai turn over its chip operations to rival Samsung Electronics Co. Ltd. in exchange for Samsung's fledgling automotive operation, according to a report in this week's Electronic Buyers' News. The report can also be found on the publication's Web site at: http://techweb.cmp.com/ebn/942/daily/013098news10.html A Samsung spokeswoman in Seoul confirmed President-elect Dae-Jung Kim's proposal, which the two companies are calling "The Big Deal." The two conglomerates "are studying the proposal but have many questions on it," the spokeswoman told CMP Media's Electronic Buyers' News. The spokeswoman also indicated that a major problem is antitrust implications for Samsung, already the largest DRAM--dynamic RAM memory chips--producer with 20 percent of the market. Hyundai was the fourth-largest DRAM maker last year. A spokesman for Hyundai in San Jose stressed that the company had no intentions of giving up its core DRAM business. And industry executives are skeptical that Hyundai will agree to part with one of its core businesses, and would more likely sell only individual electronic product lines either to Samsung or foreign interests. W. Keith McDonald, Senior Vice President of Sales and Marketing at Samsung's U.S. subsidiary, Samsung Semiconductor Inc., in San Jose, Calif., said he had heard talk of an exchange, but couldn't confirm that a deal is in the works. A source at Hyundai Electronics America, also in San Jose, told Electronic Buyers' News the company is "trying to educate government bureaucrats" on the difficulties of swapping operations with another company. For one thing, Hyundai's chip operations are much larger than Samsung's new-born car business, the source noted. LG-CALTEX OIL: S&P Revises Rating to CreditWatch Dev ---------------------------------------------------- Standard & Poor's revised its CreditWatch implications on the foreign-currency ratings of LG-Caltex Oil Corp. to developing from negative. The change primarily reflects the strong likelihood of financial support from LG-Caltex's 50% parent, Caltex Petroleum Corp., as evidenced by the latter company's recent extension of $500 million in credit to the subsidiary. LG-Caltex is Korea's second-largest refining and marketing company, with a refining capacity of 600,000 barrels per day. The company remains highly vulnerable to fluctuations in exchange rates and crude oil prices. Profitability is likely to decline as it becomes more difficult for Korean refiners in general to pass on higher crude costs to sales prices. LG-Caltex also faces the likelihood of slowing growth in demand for oil products amid economic deceleration in Korea. While export markets can currently offer temporary relief of weak sales at home, increased capacity and softening demand for oil products throughout the Asian region suggest dim prospects over the longer term. Nonetheless, the company is better positioned than its domestic competitors as a result of its strong market position in Korea and operational support from its two shareholders, Caltex and the LG Group. LG-Caltex has high debt usage, with total debt at well over 70% of capital. Although the company carries a large amount of foreign currency debt, most of this is in the form of bankers' acceptances and commercial paper to finance crude imports. The $500 million credit extension from Caltex will greatly improve the company's ability to secure crude imports. In addition, the Korean government's proposal to extend settlement periods for importers would further alleviate the company's liquidity needs. LG-Caltex's ratings remain subject to the ratings of the Republic of Korea, currently at B+/Watch Dev/C. Standard & Poor's indicated that it expects to meet with the company's management in the near future to assess its liquidity position and the impact on its operations of economic conditions in Korea. RAS LAFFAN: S&P Issues Negative Implication Rating -------------------------------------------------- Standard & Poor's has retained on its CreditWatch with negative implications two bond issues totalling $1.2bn from Ras Laffan Liquefied Natural Gas Co. The rating firm has BBB+ (triple B' plus) ratings on the Qatari LNG export project's $400m of 7.628% bonds due 2006 and $800m of 8.294% bonds due 2014. It also retained, with negative implications, its BBB+ issuer credit rating of the firm. Ras Laffan's sole offtaker of LNG production is Korea Gas (Kepco), which is 50.1% owned by the Republic of Korea and 34.5% by Kepco. Under a long-term sales and purchase agreement, Kepco's commitment will account for 75% of the Ras Laffan project's revenue base. The $1bn, 8.5 sq km Ras Laffan project, which cost over $1bn, is expected to become the world's largest LNG export facility, with export capacity of 28m tonnes a year. S&P warned, however: While the revision in the CreditWatch implications indicates potential for improvement in the ratings of {South Korea} and related entitiessignificant risk of a ratings downgrade still exists. Substantial and sustained deterioration in Kogas' credit quality could result in a ratings downgrade of Ras Laffan's bonds. S&P will continue to re-evaluate the creditworthiness of Kogas' shareholders and the implications for Ras Laffan. Standard & Poor's emphasised: Over the next 19 months, bondholders are not exposed to Korean repayment risk, but rather construction and completion risk. Capitalised interest on the bonds will cover all interest payments until completion, {and} construction and completion risk are largely mitigated by unconditional guarantees from the project sponsors, which provide for debt repayment should the project not achieve its commercial acceptance date. SAMSUNG GROUP: Restructuring Plans Detailed ------------------------------------------- The Samsung Group announced the "group's management restructuring plan," which highlights the investment of 146 billion won from the private properties of chairman Lee Kun-hee, full implementation of consolidated financial statements and the spinoff of its Joongang Ilbo, a vernacular daily, from its umbrella. The decision to invest the private properties of Chairman Lee, among other things, is to comply with the public need for stronger reform measures by business leaders. Of private investment money, 128 billion won will be raised by selling off real estates to channel the money into the group. A 10 billion won fund will be created from private savings and sales of stocks in order to support the unemployed by the group, and the remaining eight billion won will be contributed from his incomes to create the fund for the unemployed of the group. To improve the management transparency, one of the integral points needed for chaebol's restructuring, the Samsung Group will introduce consolidated financial statements from all the affiliates in April from the partial implementation by business line at present. From March, 30-50 percent of its directors and auditors will be employed from outside company, and foreign investors, financiers and lawyers will take up a considerable number of the external directors and auditors. Collaboration with small and medium-sized companies will be tightened. As well as manufacturing sectors, raw and secondary materials' markets of information, advertisement and construction sectors will be fully open to smaller firms. The current 14 percent inter-company payment guarantee ratio, involving a total of 1.7 trillion won, will be eased completely by the end of next year. For a healthier financial structure, Samsung plans to dispose of $300 million worth of overseas assets except for essential properties for production and sales activities in order to invest in the domestic headquarters. At the same time, offering rights issues of Samsung Electronics to the New York Stock Exchange will be pursued, and the ambitious project to build the group's new 102-story office in Dogok- dong, Seoul, will be given up. In five years, the debt-to- equity ratio will be lowered to 150 percent. Regarding business restructuring, the group will be reorganized into three to four core business divisions, and to this end a reseach work was entrusted to a foreign consulting company. Samsung already drew out its own restructuring plan. By combining with a report from the foreign company, the group plans to confirm major business lines by early April. The Samsung Group will spin off the Joongang Ilbo as early as possible by transferring equity stakes owned by Chairman Lee and Samsung group companies to the daily's president Hong Suk-hyun. A plan to merge the daily with the Cinema Division of Samsung Corp. is now under study to create an integrated entertainment entity. (The Korea Economic Weekly 03-Feb-1998) SAMSUNG ELECTRONICS: Studying "The Big Deal" with Hyundai --------------------------------------------------------- South Korea's President-elect has recommended that Hyundai turn over its chip operations to rival Samsung Electronics Co. Ltd. in exchange for Samsung's fledgling automotive operation, according to a report in this week's Electronic Buyers' News. The report can also be found on the publication's Web site at: http://techweb.cmp.com/ebn/942/daily/013098news10.html A Samsung spokeswoman in Seoul confirmed President-elect Dae-Jung Kim's proposal, which the two companies are calling "The Big Deal." The two conglomerates "are studying the proposal but have many questions on it," the spokeswoman told CMP Media's Electronic Buyers' News. The spokeswoman also indicated that a major problem is antitrust implications for Samsung, already the largest DRAM--dynamic RAM memory chips--producer with 20 percent of the market. Hyundai was the fourth-largest DRAM maker last year. A spokesman for Hyundai in San Jose stressed that the company had no intentions of giving up its core DRAM business. And industry executives are skeptical that Hyundai will agree to part with one of its core businesses, and would more likely sell only individual electronic product lines either to Samsung or foreign interests. W. Keith McDonald, Senior Vice President of Sales and Marketing at Samsung's U.S. subsidiary, Samsung Semiconductor Inc., in San Jose, Calif., said he had heard talk of an exchange, but couldn't confirm that a deal is in the works. A source at Hyundai Electronics America, also in San Jose, told Electronic Buyers' News the company is "trying to educate government bureaucrats" on the difficulties of swapping operations with another company. For one thing, Hyundai's chip operations are much larger than Samsung's new-born car business, the source noted. SAMYANG FOODS: Noodle Maker Files for Court Protection ------------------------------------------------------ Korea's one-leading instant-noodle maker, Samyang Foods Co., filed for court protection from creditors. Samyang's balance sheet showed a 4 to 1 debt-to-equity ratio. High levels of borrowing supported numerous acquisitions, including the purchase of a golf course. The golf course, Samyang hopes, can be sold along with its downtown Seoul headquarters to raise cash. The plot of headquarters land is valued at about 100 billion won. In the end, "it was hard to get det extended, let alone get fresh loans, because we didn't make much money," a Samyang spokesperson said. (The Wall Street Journal 02-Feb-1998) SUKWANG: Leading Fashion Maker Files for Court Protection --------------------------------------------------------- One of South Korea's leading apparel makers, Sukwang, applied for court protection from creditors for debt rescheduling Friday faced with repayment pressure from banks in the wake of an International Monetary Fund bailout. Sukwang's cosmetics-making affiliate Julia also applied for court protection. The 42-year-old apparel maker has fared well in mens' and women's wear and has popular foreign brands Lacoste and Hangten to rank as one of the country's top 10 leading fashion producers. It posted sales of 260 billion won last year. (Asia Pulse) ===================== N E W Z E A L A N D ===================== BENMORE PRODUCTS: Interim payment to Benmore creditors ------------------------------------------------------ Creditors of failed Auckland meat company Benmore Products are receiving a 40 cent-on-the-dollar distribution from the company's liquidator, David Davidson. But Davidson was unwilling yesterday to speculate on the size of the final payment and said it might be some time before matters were finalised. Benmore went into voluntary liquidation on October 23, 1997, owing $12 million. Davidson said up to 750 creditors would receive the interim distribution, which was being mailed out yesterday and today. By far the largest group of creditors was farmers, some of whom were caught in the Fortex and Weddel meat company receiverships. Davidson said he was still trying to sell the company's Mt Wellington processing plant, in which several parties had expressed an interest. Coromandel Meat Processors is using the plant. Davidson said he had reached an agreement with the Commerce Commission over its claims for $12 million for alleged North Island meat company price-fixing two seasons ago. However, agreement was needed by a third party before the arrangement was finalised. Davidson anticipated the result would help the remaining creditors, and hoped an agreement would be reached next month. With preferential creditors and debenture holders paid in full there was likely to be a significant return to unsecured creditors. (Waikato Times 01/30/98) SMITHS CITY: Receivership Noteholders May Choose Equity ------------------------------------------------------- Smiths City Group's capital noteholders will be given a choice during the next month on whether to take shares in the company. The Christchurch-based retailer reaches a milestone on February 12 with a 5c payment on each note, reducing the face value to 25c from the original 90c. This (25c) is the trigger point set in 1993, when the company came out of receivership, at which noteholders would be given the choice of having the final portion in cash or shares. With Smiths shares trading above 55c, most noteholders could be expected to take shares. Smiths City's chief executive, Craig Boyce, said he was thrilled that payments had reduced the face value to the 25c level, allowing the completion of the scheme of arrangement. He said he was confident from the start that the strength of the company's South Island business would allow payments to be made down to 40c, if not down to 25c. As it happened, repayments have been ahead of schedule. Mr Boyce said the total $1.36 million payment on February 12 would be made from trading cash flow. If all noteholders decide to take shares, 34 million new shares will be issued, on top of the 22m existing already. Mr Boyce said the scale of increase could provide a lot of uncertainties, but the market would decide the value of the shares. The February 12 note payment will be made on holdings as at February 5. Noteholders will also be sent the documentation for the share/cash election. They will have 20 days to reply; the formal date for the completion of the scheme is October 31. (The Press 03-Feb-1998) ===================== P H I L I P P I N E S ===================== FINANCIERA MANILA: Seeks Relief from Debt Payments -------------------------------------------------- A financing company and its subsidiaries have asked the Securities and Exchange Commission in Manila for a breathing spell from its debt payments. Financiera Manila, Inc. and its fully owned subsidiaries, Growth Dimensions International, Inc. and Costa Mesa Development, Inc. yesterday filed a petition with the SEC for the suspension of their debt payments. As of the latest count, the company claims it had incurred obligations amounting to 1.335 billion Philippine pesos (PhP). The firm's largest credtors are: Far East Bank and Trust Co. PhP 141 million United Coconut Planters Bank PhP 45 million Metropolitan Bank & Trust Co. PhP 105 million Asia Trust Bank PhP 8 million International Exchange Bank PhP 5 million The firm, however, assured its assets, estimated at PhP1.449 billion, "would be more than sufficient to pay off all its obligations." In its petition, the company also asked the SEC to appoint a management committee to oversee its rehabilitation. The firm attributed its financial woes on the continued economic crunch resulting from the Philippine peso's depreciation and high interest rates. (Business World) MARCOPPER MINING: Laying Off Majority of Workers ------------------------------------------------ Marcopper Mining Corp. is laying off "majority" of its workers due to serious financial problems. In a disclosure at the Securities and Exchange Commission (SEC), Marcopper officials said it has been forced to resort to such measures because the mine's continued "non-operation" had "significantly depleted its financial resources." The firm was forced to shut down its operations due to a mining incident in 1995 when tons of mining wastes or tailings spilled into the Boac River in Marinduque. The incident caused damages estimated at billions of Philippine pesos (PhP). Since the mining incident, the firm has been forced to pour much of its resources into rehabilitating the damaged river and the nearby communities. The firm said that as of September last year, its total liabilities amount to PhP2.59 billion as against last year's PhP2.871 billion. Its total assets, on the other hand, was estimated at PhP2.59 billion. According to its unaudited financial statements, the firm had not been earning since last year although it continues to incur operating costs and other expenses. As of September of 1997, it has accumulated some PhP350.004 million in operational losses. NEGROS NAVIGATION: New Investments May Avert Bankruptcy ------------------------------------------------------- Shipping liner Negros Navigation (Nenaco) has approved a large increase in its authorised capital to Peso 4bn ($100m) from Peso 1.1bn, opening the way for new investors to take stakes in the inter-island shipping firm. The company is in the midst of negotiations with several strategic investors who have expressed interest in taking a major stake in the company, Negros Navigation president Manuel Garcia told Lloyd's List International. Garcia declined to give details of the negotiations, however. We would rather not disclose information at this point as it could affect on-going talks, he indicated. Nenaco, the Philippines oldest inter-island passenger and freight carrier has been reported to be foundering over debts it incurred to finance an ambitious US$33.5m fleet and port expansion programme. Nenaco, however has been quick to deny that the shipping line would be filing for bankruptcy. No, it is not true that we are filing for bankruptcy as we have more than enough assets to cover our debts, Nenaco chairman and chief executive officer Daniel Lacson said in a recent statement. Mr Lacson blamed the Asian currency crisis which had caused the peso to lose much of its value and interest rates to soar as the cause of the shipping line's problems. These developments he said had jacked up the cost of money for a business heavily dependent on imported equipment. The Nenaco chief executive nevertheless, conceded the need for financial re- engineering'. He said that the company was in the final stages of negotiations with strategic foreign partners which would help replenish the shipping company's depleted resources. He did not name the foreign investors involved. He also pointed out that the company's creditors have agreed to defer collecting on outstanding loans until restructuring talks are completed. The banks as well as investors have been very supportive, he said. Nenaco started operations in 1932 transporting passengers and goods between the central Philippine island of Negros and neighbouring islands. Since then the company has grown into a highly diversified conglomerate with investments in insurance, banking, food processing and trucking. Analysts traced the company's difficulties to its over- expansion into areas outside its field of expertise as well as an ambitious refleeting programme which push up its cost of operations but failed to improve its earnings. (LLoyd's List International 06-Feb-1998) PETRON CORP.: Posts Loss and Can't Increase Revenues ---------------------------------------------------- Petron Corp., the nation's largest oil refiner, announced that it would post a Peso 631 million (US$15.6 million) year-end loss on undisclosed sales. That loss compares with a year-earlier profit of Peso 4 billion. At the present time, amid increasing costs and a deflating currency, Petron is subject to a Phillipine court injunction prohibiting it from passing those increasing costs on to consumers. (The Wall Street Journal 05-Feb-1998) VITARICH CORP.: Signs Deal with Creditors ----------------------------------------- Food company Vitarich Corp. has entered into a mortgage trust debenture with 12 creditor banks under which its fixed assets were pooled together as collateral for credit lines totaling three billion Philippine pesos (PhP), according to a report published in Business World last week. The deal came four months after Vitarich first felt the burden of interest payments, prompting its creditors to ask for collateral for its unsecured loans. Armando Escobar, Vitarich chief financial officer, told Business World in a telephone interview that the 12 creditor banks: (a) Philippine National Bank, (b) Metropolitan Bank and Trust Co., (c) PCIBank, (d) Bank of the Philippine Islands, (e) Far East Bank and Trust Co., (f) Land Bank of the Philippines, (g) Solidbank Corp., (h) Bank of Commerce, (i) Union Bank of the Philippines, (j) Rizal Commercial Banking Corp., (k) Philippine Banking Corp., and (l) Standard Chartered Bank, owed an aggregate of PhP2.8 billion, all have a right to the properties of the firm equal to the amount of their loan exposure. In a disclosure to the Philippine Stock Exchange, Vitarich said the firm's decision to enter into the mortgage trust debenture arrangement was approved by its board of directors at a meeting held January 28. The move was intended to secure renewal of all the firm's credit lines. Vitarich's board also approved the increase in the company's authorized capital stock to PhP1 billion from PhP500 million. Vitarich used some short-term loans for its working capital, expansion projects, and for its revolving fund, according to Business World. However, its chicken operations -- which contribute 70% to the firm's total business -- stumbled anew due to slow sales. ================= S I N G A P O R E ================= SEMBAWANG CORPORATION: Shares Drop to Nine-Year Low --------------------------------------------------- Shares in Singapore shiprepair conglomerate Sembawang Corporation fell to a nine-year low yesterday amid fears that the company's debt burden was too high. Analysts said SembCorp stock was avoided by investors nervous about companies with high borrowings. In trading last week, Sembawang stock was down 39 to S$2.69 (US$1.61) after hitting a low of $2.59 earlier. The last time SembCorp traded at these levels was around August 1988. Analysts were quoted as saying investors were concerned about SembCorp's borrowings which some estimated at between $1bn and $1.3bn. "It is really hard to tell what is the exact level. But what is known is that the company has been on a major acquisition binge in the past two years," one analyst said. (LLoyd's List International; 01/08/98) =============== T H A I L A N D =============== ALPHATEC ELECTRONICS: To Pay 5% to Compromise US$330 Million ------------------------------------------------------------ In the first major Thai restructuring, a steering committee of creditors of Alphatec Electronics PLC proposes that Alphatec distribute new stock to pay creditors approximately 5% on claims totalling US$330 million. The steering committee proposes that the company issue a number of shares sufficient to dilute current equity holders' interests to 5% of reorganized Alphatec, thus giving current creditors 95% ownership. Observers say that this plan points-out a deficiency in Thailand's bankruptcy laws because the company's largest shareholder, founder and ex-CEO will have veto power over the steering committee's proposal. Alphatec sought protection from creditors after Price Waterhouse disclosed that management had overstated profits by at least $164 million from between 1994 and 1997. (The Wall Street Journal 04-Feb-1998) SIAM CEMENT: Posts Massive 1997 Foreign Exchange Losses ------------------------------------------------------- One of Thailand's biggest companies -- Siam Cement Plc -- incurred estimated foreign exchange losses of 851 million dollars last year, senior executives said Monday. The losses were estimated at a baht rate of 47 to the dollar. Siam Cement Vice President Aviruth Wongbhuddapitak said the industrial giant was expected to lose 40.5 billion baht (851 million dollars) as a result of the collapse of the baht against the U.S. dollar in the second half of last year. Aviruth confirmed the previously reported third quarter net loss of 18.33 billion baht and the nine-month net loss of 21.93 billion baht, but gave no estimate of profit or losses for the full year. Analysts said the company was at least two years away from returning to profitability. "Siam Cement still has a lot of problems and I believe it will not be profitable in 1998 and probably not in 1999 either," an analyst with a Bangkok brokerage house said. Aviruth related that Siam Cement's total outstanding foreign debt stood at 4.2 billion US dollars and the company had taken steps to convert 1.2 billion dollars of that total to yen-denominated debt. Siam Cement had debt repayments worth 550 million dollars due this year while interest expenses were expected to total 300 million dollars. Aviruth indicated that Siam Cement had no hedge on its foreign debts. Siam Cement Group's 1997 combined sales were estimated at 174.20 billion baht, with export sales totaling 34.58 billion baht. (Agence France Presse 02-Feb-1998) =========== T U R K E Y =========== MARTI SHIPPING: 10% Cash Proposal Plus Stock to Creditors --------------------------------------------------------- Troubled Turkish capesize operator Marti Shipping is offering unsecured creditors 10% of money owed and a share of future trading profits in the hope of surviving financial difficulties which have seen the arrest of a number of its ships. The rescue plan has been drawn up by London-based Fairwind Shipping, acting at the request of several major trade creditors, and Marti itself. Under proposals circulated before Christmas, banks will be asked to provide a cash injection to pay 10 in the dollar on all unsecured trade debt, along with 100% of local debt and wages, light dues and pilotages. The funds will be paid into a control account managed by Fairwind and will be distributed when 90% of all trade creditors have agreed the package and signed acceptance letters. A credit committee led by Fairwind will be established to control receipts and payments, and dispense money needed by Marti for operational purposes. Creditors who reject the offer will be treated as hostile, and will not get individual settlements. The document warns: The situation is very serious and at this time owners and charterers of vessels are unable to settle any individual unsecured trade debt, and are unable to make any separate deals with any supplier for fear that they will be seen to be conspiring to commit a fraudulent preference. If secured creditors arrest vessels, unsecured trade creditors are likely to receive nothing after crew wages, mortgage and local suppliers have been sorted out. A strategy of arrest in the early stages of cashflow problems and with ships actually trading does have some chance of success. However, such a strategy at this point with this fleet is guaranteed to get no money and to push the owners out of business, it is stated. The owners still have a desire to pay back everything they owe and they do still have some assets which are capable of trading. A complex ownership structure has so far hindered attempts at legal recourse. In September, a French court rejected a $1m claim from Pan Ocean Shipping of Korea against Marti, following the arrest of 103,325 dwt combination carrier Obo Basak in Dunkirk the previous month. The vessel is owned by Denizcilik ve Ticaret, a single ship company that shares Marti's Istanbul address. However, the court ruled that community of interest did not constitute commonality of ownership. There was also controversy in October, when nine officials of Egyptian company Pace Shipping Services Network boarded Obo Engin, a 78,000 dwt combination carrier. Their intention was to secure money allegedly owed by Marti, former manager of the vessel, for canal transit fees. But owners Vakif Deniz Leasing insisted that the Marti connection had been severed, and that Marti owed it $4.3m. The master refused to let the Pace employees disembark and the vessel sailed on to Istanbul. Some creditors believe the package is overly optimistic, given Marti's earning potential and the high level of debts, which run to many millions of dollars. But Fairwind director Jean Richards expressed confidence that the rescue was viable. A number of major creditors already accepted in principle. (Lloyd's List International 05-Jan-1998) 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., Princeton, NJ USA, and Beard Group, Inc., Washington DC USA. Debra Brennan and Lexy Mueller, Editors. Copyright 1998. All rights reserved. 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 $875 per month 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 * * *