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/raid1/www/Hosts/bankrupt/TCRAP_Public/980617.MBXT 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, June 17, 1998, Vol. 1, No. 82 Headlines C H I N A & H O N G K O N G CA PACIFIC GROUP: Group Director's Trial Delayed DONGFANG ELECTRICAL: Deal Over Third Party's Unpaid Debt FORLUXE SECURITIES: Liquidator Finds $39m Shortfall LAI SUN: $3b Proceeds Used to Reduce Debt Burden MANSION HOLDINGS: Results Announcement ON TAT DECORATION EGINEERING LIMITED: Winding-up Notice STRONG WEALTH DEVELOPMENT: Notice of Creditors' Meeting I N D O N E S I A PT BANK DANAMON: Posts Net Loss in Reversal of Fortunes J A P A N FUJITA CORP: Downgraded by Moody's HAZAMA CORP: Downgraded by Moody's KUMAGAI GUMI: Downgraded by Moody's LONG TERM CREDIT BANK: Sells US$1.57b Stake to German Bank NICHIEI COMPANY: Shares Fall on Debt Concerns NISSAN DIESEL: Shares Fall Downgrade OBAYASHI CORP: Moody's Warns of Pressure on Construction SANYO SECURITIES: To Sell Hong Kong Unit TAISEI CORP: Moody's Warns of Pressure on Construction K O R E A DONG AH: Charges Against Chairman Hurt Libyan Project HALLA PULP: Liquidation Delayed KIA HEAVY: Seeks Court-Ordered Debt Reduction M A L A Y S I A CH'NG ENG HONG HARDWARE SDN BHD: Winding-up Petition MERAPI EMAS SDN BHD: Winding-up Petition PELANCONGAN DAN PENGEMBARAAN: Winding-up Petition ZANSHIN PLASTIC INDUSTRIAL SDN BHD: Winding-up Resolution P H I L I P P I N E S PHILIPPINES AIRLINES: Official Confirms Near-Bankruptcy PHILIPPINE AIRLINES: Problems May Prove Costly for Banks S I N G A P O R E EMPORIUM HOLDINGS: Parent's Troubles Concerns Suppliers ================================= C H I N A & H O N G K O N G ================================= CA PACIFIC GROUP: Group Director's Trial Delayed ------------------------------------------------ Accused CA Pacific Group director and his wife appeared again at Eastern Court yesterday. Both of them each face a charge of false accounting in relation to a $373 million loan. Magistrate Gary Tallentire adjourned the case to September 7, following the prosecution's request to allow more time for further investigation. DONGFANG ELECTRICAL: Deal Over Third Party's Unpaid Debt -------------------------------------------------------- H share Dongfang Electrical Machinery has withdrawn its writ against the China Construction Bank claiming 156 million yuan (about HK$145.18 million) in entrusted funds. The change of heart came as the H share was finally able to retrieve the funds it claimed it had entrusted with the Luohuang department of the bank's Chongqing sub-branch, to be lent to a third party. The third party, which then defaulted on payment, is understood to be a mainland company. Dongfang yesterday said the decision to withdraw proceedings in the Chongqing City Higher People's Court followed execution of settlement and repayment agreements with the bank and third party on June 12. Dongfang said it had been repaid 61 million yuan on June 12 and would be repaid a further 30 million yuan within 15 days from the date of the agreement. The remaining 65 million yuan would be paid by December 31. As part of the condition, the third party would have to pledge certain legal and effective assets recognised as security for repayment of the amounts. Interest accrued on the funds would be calculated at the prevailing bank interest rate. The Chongqing sub-branch of the China Construction Bank would monitor the third party's performance in meeting repayment obligations, the company said. FORLUXE SECURITIES: Liquidator Finds $39m Shortfall --------------------------------------------------- The SCMP of June 16 reports that Nick Hill of Nelson Wheeler Corporate Reconstruction and Insolvency, gave the liquidator's first report to creditors the day before. The report shows that the broker received claims for client shares of up to $56.29 million compared with $17.05 million in shares held as of June 1. This left a shortfall to clients of $39.24 million, making it nearly impossible for all clients to get a full repayment. A winding-up hearing has been set for tomorrow and another set for July 21 to decide how to distribute the remaining shares held by the firm to clients. The shares may be returned to the clients or sold and the money divided among clients on a pro rata basis. The shortfall arose because clients' shares held in the broker's account in the Central Clearing and Settlement System were alleged to have been illegally transferred to the margin finance arm, Forluxe Finance, which then allegedly used those shares as collateral for financing from various banks, and loans amounting to about $40 million were credited to bank accounts linked to missing Forluxe boss James Mui Kwong-nok and his brother Gordon Mui Kwong-yin. The Mui brothers disappeared on May 4 and are being sought by the Commercial Crime Bureau. The provisional liquidator has secured an injunction to freeze the assets of the brothers and James Mui's wife. However the family has few assets on hand that could potentially be returned to clients. The firm had a broker seat that could be worth up to $5 million and about a dozen parties had expressed interest in the seat which has been put up for sale by tender. According to the Hong Kong Standard, the value of shares held by both Forluxe Securities and Forluxe Finance stood at $19.5 million, making the amount of shortfall $36.8 million. Compensation to clients will be made in August, at the earliest. The provisional liquidator urged clients who have not lodged their claims to do so to the stock exchange as soon as possible. Nelson Wheeler has received 323 claims from depositors and another 175 claims are expected. The companies had 527 depositors, of which 29 were net debtors. Chairman of the SFC said that the stock exchange was still undecided over the compensation package for Forluxe clients, adding that the power for enacting compensation packages was with the stock exchange, not the SFC, and he said that such arrangement should be reviewed. LAI SUN: $3b Proceeds Used to Reduce Debt Burden ------------------------------------------------ Lai Sun Development, a Hong Kong listed property developer, has raised HK$ 3 billion from disposal of non-core assets to reduce debt, according to the company director. The fund was generated from the sale of the Majestic Hotel, 150 car- parking areas at New Mandarin Plaza and International Theater in Kowloon City, small lots and residential developments. The company said it will raise a further HK$1 billion from the sale of five residential developments. Part of the cash will also be used as working capital. The company director said Lai Sun will sustain a loss of HK$60 million from a default on the purchase of a Singapore Government site for S$91.5 million with its Singapore joint-venture partner-Eltech Electronics. MANSION HOLDINGS: Results Announcement -------------------------------------- Mansion Holdings (stock code 547) announced its year end result which has posted a total operating loss of HK$852 million. Mansion has made a provision for bad debts in the amount of HK$276 million and the net loss for the year amounted to 714 million. ON TAT DECORATION EGINEERING LIMITED: Winding-up Notice ------------------------------------------------------- A notice on the Hong Kong Standard of June 16 says that a petition for the winding-up of the above named was presented to the High Court on May 28 by Cheung Kwok Leung, and that the petition was directed to be heard before the court at 11:00 am on July 8. STRONG WEALTH DEVELOPMENT: Notice of Creditors' Meeting ------------------------------------------------------- The Hong Kong Standard of June 16 show a notice that a meeting for creditors of Strong Wealth Development Limited will be held on June 22 to consider a special resolution for the creditors' voluntary winding-up of the company and to nominate a liquidator. ================= I N D O N E S I A ================= PT BANK DANAMON: Posts Net Loss in Reversal of Fortunes ------------------------------------------------------- PT Bank Danamon Indonesia submitted its 1997 year end results to the Jakarta Stock Exchange. The bank has posted a net loss of five billion rupiah in 1997 as compared with the net profit of 201.7 billion rupiah a year earlier. The bank's units booked losses of 14.6 billion rupiah compared with earnings of 1.8 billion rupiah the year before, while the bank booked a net profit of 9.6 billion rupiah compared with 199.9 billion rupiah in 1996. The operating loss has slashed down the net operating income to 46.8 billion rupiah compared with 267 billion rupiah in 1996. ========= J A P A N ========= FUJITA CORP: Downgraded by Moody's ---------------------------------- Moody`s Investors Service warned that it is close to cutting its rating for two of Japan's largest, struggling construction firms, Taisei Corp and Obayashi Corp. Moody's also has downgraded second-tier construction firm Fujita`s senior unsecured debt rating to B2 from Baa3. HAZAMA CORP: Downgraded by Moody's ---------------------------------- Moody`s Investors Service warned that it is close to cutting its rating for two of Japan's largest, struggling construction firms, Taisei Corp and Obayashi Corp. Moody's also has downgraded second-tier construction firm Hazama's senior unsecured debt rating to B3 from B2. KUMAGAI GUMI: Downgraded by Moody's ----------------------------------- Moody`s Investors Service warned that it is close to cutting its rating for two of Japan's largest, struggling construction firms, Taisei Corp and Obayashi Corp. Moody's also has downgraded second-tier construction firm Kumagai Gumi`s B1 outlook rating from stable to negative. LONG TERM CREDIT BANK: Sells US$1.57b Stake to German Bank ---------------------------------------------------------- According to a June 16 SCMP article, Long Term Credit Bank of Japan said on June 15 it had sold a big slice of its operations, its aviation and shipping financing division based in London and New York but with clients worldwide, for US$1.57 billion to a German bank, Deutsche Verkehrs Bank, hoping the move could strengthen its crucial capital to asset ratio. A spokesman for the bank said it had been looking for a buyer since February, with advice from the top United States bank J.P. Morgan and Co. to focus on its remaining core business. NICHIEI COMPANY: Shares Fall on Debt Concerns --------------------------------------------- Nichiei Co. (8577 JP ) fell 550 to 7,790 after earlier falling to 7,610, a 52-week low, amid concern that the company, which provides short-term loans to small and midsize firms, will be faced with increasing bad debts as the economy worsens and more companies will be unable to repay their loans. Japanese corporate bankruptcies rose 36.6 percent in May from a year ago. NISSAN DIESEL: Shares Fall Downgrade ------------------------------------ Nissan Diesel Motor Co. (7210 JP ) fell 11 yen to 278. The truckmaker was downgraded to "below average" from "outperform" by analysts Noriyuki Matsushima and Tsuyoshi Mochimaru at Nikko Research Center. OBAYASHI CORP: Moody's Warns of Pressure on Construction -------------------------------------------------------- Moody`s Investors Service warned that it is close to cutting its rating for two of Japan's largest, struggling construction firms, Taisei Corp and Obayashi Corp. Moody`s said it was reviewing its medium grade Baa2 senior debt rating for Taisei Corp and its Baa1 senior debt rating for Obayashi Corp. According to Moody`s, the profit margins of Obayashi have been declining for the past two years and will face further pressure in the more competitive construction market in Japan. SANYO SECURITIES: To Sell Hong Kong Unit ---------------------------------------- The Sanyo Securities Co., a medium-sized Japanese brokerage firm which went bankrupt last November, will sell its Hong Kong unit to a Taiwanese brokerage house. Sanyo Securities Asia Ltd. of Hong Kong will be sold for HK$62.8m (US$8.1m) to First Securities Ltd. of Taiwan. Sanyo Securities failed last November due to a sharp deterioration of its balance sheet. According to a report in the Asian Wall Street Journal, Sanyo Securities has been in consultation with several financial firms to transfer its businesses in accordance with Japanese corporate rehabilitation law. TAISEI CORP: Moody's Warns of Pressure on Construction ------------------------------------------------------ Moody`s Investors Service warned that it is close to cutting its rating for two of Japan's largest, struggling construction firms, Taisei Corp and Obayashi Corp. Moody`s said it was reviewing its medium grade Baa2 senior debt rating for Taisei Corp and its Baa1 senior debt rating for Obayashi Corp. The credit agent said Taisei's leverage is expected to remain high because of the erosion of equity that resulted from its major asset write-off package. The weakening Japanese financial sector may also have negative implications for flexibility in management of Taisei's highly leveraged capital structure. ========= K O R E A ========= DONG AH: Charges Against Chairman Hurt Libyan Project ----------------------------------------------------- According to a report in the Korea Times, Dong Ah Construction Company officials expressed strong concerns regarding allegations that the former chairman diverted funds from overseas projects. These charges may threaten Dong Ah's efforts to participate in the Libyan government's $10b Phase III and Phase IV Great Man-Made River Project. Dong Ah has been the main contractor for the first two phases of the project, and the bidding on the $1.3b Phase III is about to conclude. Dong Ah officials said that media reports on the allegations are having major implications on their Libyan bid despite the fact that the investigation of the charges has not been concluded. Mr. Choi Won-suk resigned as chairman and chief executive officer of Dong Ah last month under pressure from creditors who are now in the process of confiscating his entire wealth. Another Dong Ah overseas proposal was also scrapped yesterday when Samsung Corporation suddenly withdrew from the bidding in a Japanese public construction project. A consortium lead by Samsung (and including a 20 percent Dong Ah stake) tendered the lowest bid price for a Y10b funeral service hall to the Yokohama City government. However, Samsung abruptly pulled out and asked its consortium partners to abandon the project. Samsung officials said that they had offered a low bidding price, and might suffer a loss. The Korea Herald quote a Dong Ah official as saying they could not understand Samsung's sudden withdrawal, as the bidding price calculations had been carefully reviewed. It was also noted that because of the last-minute withdrawal from this project, Samsung and all of its consortium partners (including Dong Ah) will be restricted from participating in future public projects offered by the Yokohama City government for the next two years. Dong Ah has been previously listed as a conglomerate whose viability is being rigorously evaluated by creditor banks under the direction of the Financial Supervisory Commission, Korea's newly formed fiscal watchdog organization. According to earlier reports in the Korea Herald, Dong Ah has so far managed to survive its current financial crisis with cooperative syndicated loans amounting to nearly 1 trillion won (US$714m) from Korean banks. HALLA PULP: Liquidation Delayed ------------------------------- According to Korean language Maeil Kyungje, the Halla Pulp Company's liquidation is delayed because one of its debtors, Hanguk Security Insurance Company (whose president is Mr. Chu Am-dae) is opposed to Halla's sale to an American company, Bowater Company. This opposition is continuing despite the fact that on June 12, 1998 the Kwangju District Court dismissed Hanguk Security Insurance Company's suit to cancel Halla's current liquidation plan. According to this plan, Hanguk Security Insurance will be paid back 50% of its principal money invested in Halla Pulp Company. Other debtors have criticized Hanguk Security Insurance Company's continued opposition as it puts the sale of Halla to Bowater Co. in difficulty. KIA HEAVY: Seeks Court-Ordered Debt Reduction --------------------------------------------- Despite the severe economic slump that hit Korea, Kia Heavy's Industries Ltd.'s sales in the first half of last year jumped 17.0 percent to 246.6 billion won ($174.2 million) from a year ago, with its machine tool division marking a particularly steep turnover rise of 50 percent. That is, until July, 1997 when its parent Kia Group, an automotive-steel conglomerate, suffered huge debts of 5 trillion won. The abrupt collapse of the nation's eighth- largest conglomerate at the time rippled through most of its subsidiaries, including Kia Heavy. Kia Heavy's president and CEO Cho Byong-chang told the Korea Herald June 16 that his company is now seeking a court mediation for debt restructuring, as the first stage of normalizing its management. On May 29, a district court in Changwon, a South Kyongsang Province city in which Kia Heavy is headquartered, gave the troubled company the go-ahead for launching the process of court protection, he said. "And I am sure that the court will protect us from our creditor banks barring unexpected changes," he said in a recent interview with The Korea Herald. As one of the terms for allowing to start the process of court protection, the Changwon district court allowed Kia Heavy to pay its debts to creditor banks in five years after a grace period of another five years. The decision will likely pave the way for the financially- troubled heavy equipment manufacturer to normalize its management by itself. If an ailing company is given court mediation for debt repackaging, it can seek to turn itself around under the existing management. But when a firm is placed under a court receivership, its management is replaced by a court-appointed receiver, although all of its debts and assets are freezed. As Kia Heavy is expected to get a court mediation order, the company will likely resume financial transactions, by issuing promissory bills and getting fresh loans. =============== M A L A Y S I A =============== CH'NG ENG HONG HARDWARE SDN BHD: Winding-up Petition ---------------------------------------------------- Ann Yak Siong Hardware Sdn Bhd (petitioner) on 27/5/98 petitioned for the winding-up of Ch'ng Eng Hong Hardware Sdn Bhd (respondent). The petition is directed to be heard on 26/8/98. MERAPI EMAS SDN BHD: Winding-up Petition ---------------------------------------- Sime Bank Bhd (petitioner) on 14/5/98 petitioned for the winding-up of Merapi Emas Sdn Bhd (respondent). Hearing was set on 15/7/98. PELANCONGAN DAN PENGEMBARAAN: Winding-up Petition ------------------------------------------------- Dynawell Corporation Sdn Bhd (petitioner) on 28/5/98 petitioned for the winding-up of Pelancongan Dan Pengembaraan I.B. Rich (M) Sdn Bhd. The petition is directed to be heard on 15/7/98. ZANSHIN PLASTIC INDUSTRIAL SDN BHD: Winding-up Resolution --------------------------------------------------------- The directors of Zanshin Plastic Industrial Sdn Bhd on 10/6/98 resolved to wind-up the company voluntarily. A creditors meeting will be held on 7/7/98. ===================== P H I L I P P I N E S ===================== PHILIPPINES AIRLINES: Official Confirms Near-Bankruptcy ------------------------------------------------------- A Philippine Air official has told Dow Jones: "We're one step away from bankruptcy." He estimated PAL's total debt at $2 billion, owed to 1,000 creditors that include banks and aircraft lessors. PAL's board discussed the possibility of suspending debt payments at a special meeting June 9. But the decision on whether to go for a debt moratorium was deferred until a working group formed to look into other options made its recommendation. The official said the financial pressures on the airline caused by the pilots' strike was so great that there was no option but to seek relief from debt payment. Since the pilots' strike began June 5, PAL estimates it has lost over 2 billion pesos (PHP) ($1=PHP41.771) in lost revenues. In its financial year to March 31, 1998, PAL posted a net loss of PHP8.08 billion, a threefold increase on its year-earlier loss. Most of the airline's debts were incurred to fund a $4 billion program to modernize the Philippine flag carrier's fleet. PAL senior vice president for sales and services Avelino Zapanta, in a separate interview, said the airline met with its creditors Monday night to appeal for patience. He said it was explained to creditors the problems PAL now faces, and the actions it has and will take to address them. The senior official, who refused to be named, said the airline's major creditors even concurred with the need to safeguard PAL's assets to ensure its continued operation. PHILIPPINE AIRLINES: Problems May Prove Costly for Banks -------------------------------------------------------- Philippine Airlines (PAL) could cause problems for local and international banks with loans to the carrier. ABN Amro said the estimated outstanding debt of PAL is approximately US$1.5 billion as of December 1997. Last week, the airline reported a loss of 8.08 billion pesos (HK$1.53 billion) in the year to March 31, 1998, more than triple the previous year's loss. ABN said Philippine Commercial International Bank had a loan exposure to PAL of nearly 200 million pesos. It also said in 1996 Allied Bank arranged US$182 million in financing for PAL. Among other lenders noted were China Banking Corp, Union Bank of the Philippines and Equitable Banking Corp. ABN said the airline's largest exposure is to European export-credit agencies, which supplied loans totaling US$850 million to cover nine new airlines. ================= S I N G A P O R E ================= EMPORIUM HOLDINGS: Parent's Troubles Concerns Suppliers ------------------------------------------------------- Emporium Holdings has been busy assuring jittery suppliers who were concerned about the impact of its parent company's problems and the severe retail downturn on the department store chain, according to BusinessTimes of June 16. Responding to BT's queries, Todd Anderson, chief executive officer of Emporium, said: "In the last three weeks, we've sat down with more than 50 vendors and explained to them and everybody who needs to know what our situation is and we're still in business." Emporium's suppliers had turned cautious following press reports that HK-based Theme International was facing financial problems. The HK retailer took over a 56 per cent stake in loss- making Emporium Holdings through a share swap in June 1997. In April, Theme's credit lines were cut. Its bankers were also demanding repayments of HK$216 million (S$48.9 million). Theme has since announced that shareholder China Everbright has offered it a HK$80 million secured loan to help solve its financial woes. Most suppliers to retail stores have also turned edgy because of the retail downturn in recent months. In addition, some former suppliers to now-bankrupt Japanese retailer Yaohan Department Store are now cautious about extending credit to retailers such as Emporium. Mr Anderson said Emporium was not heading down the same road as Yaohan, adding: "The retail industry is tough right now and sales are hard to come by but the company is doing everything we can to continue to generate the sales that we need." He said the chain is gearing up for a big sale starting June 19. This follows an earlier sale from May 22 to June 1. 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 * * *