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/raid1/www/Hosts/bankrupt/TCRAP_Public/990112.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 Tuesday, January 12, 1999, Vol. 2, No. 7 Headlines * C H I N A & H O N G K O N G * AWT HOLDINGS: AWT loses chance to clear debts through sale GUANGDONG INTERNATIONAL: Debt decision dismays creditors GUANGZHOU INTERNATIONAL: To auction stake HOKKAIDO TAKUSHOKU BANK: Branch chief of failed bank held LUEN FAT HONG INTERNATIONAL: Luen Fat Hong seeking $36m * J A P A N * ASATSU-DK: Results announcement MITSUKOSHI: To sell its stake in Tiffany * K O R E A * HANBO IRON & STEEL: Creditors assure Washington on sale HANBO IRON & STEEL: Interest in buying Hanbo is weak HYUNDAI: Hyundai 332.6% debt-to-equity ratio cited HYUNDAI MOTOR: To sell off car seat division to US firm HYUNDAI US SEMICON: S&P maintains minus rating KONGJU KEUMSUNG CREDIT CO-OP: Co-op is bankrupt KWANGMYUNG ELECTRONICS: Begins liquidation procedure PAEKJE CENTRAL CREDIT CO-OP: Co-op is bankrupt * M A L A Y S I A * RHB BANK: Off rating watch RENONG: Toll firm to anchor debt-hit Renong * P H I L I P P I N E S * PHILIPPINE AIRLINES: New consultants to meet with creditors * T H A I L A N D * NATIONAL PETROCHEMICAL: Debenture issue sells out first day SHINAWATRA COMPUTER: SC&C plans to raise paid-up capital TELECOMASIA: Denies share sale to BBL TOTAL ACCESS: TAC under pressure for partner ================================= C H I N A & H O N G K O N G ================================= AWT HOLDINGS: AWT loses chance to clear debts through sale ---------------------------------------------------------- According to the South China Morning Post, air and sea forwarder and property investor AWT Holdings lost an opportunity to reduce its debts as its shareholders have disapproved the sale of its building in Kwun Tong. The building was acquired in August 1993 and is being used by the company as a warehouse for its freight forwarding business. The company's chairman David Leung Tze-hang said yesterday after the company's special general meeting that with the cash consideration of $15 million, the disposal of the building could have brought $6.3 million extra working capital, which was very important to the company. He said he would talk to creditor banks for further negotiation. Last August, Canadian Eastern Finance issued summons to demand for repayment of $8.7 million after the group had pledged the building to the finance company in order to obtain a $8 million loan. Mr Leung said the mortgagee of the building had extended the deadline of money repayment to February 8 instead of December 31, 1998 as originally set. AWT secured on December 5 $125 million from banks and financial institutions, including a $42 million short-term loan and a $69 million mortgage loan. GUANGDONG INTERNATIONAL: Debt decision dismays creditors -------------------------------------------------------- According to the South China Morning Post, the liquidation investigation committee of Guangdong International Trust and Investment Corp (Gitic), led by the Bank of China, announced at the meeting yesterday that Gitic and three of its principal finance subsidiaries -- Gitic Shenzhen, Gitic International Leasing and Guangxi Enterprises Development -- would be allowed to file for bankruptcy. The liquidation committee reported that of the 36.16 billion yuan in liabilities, 15.95 billion yuan was owed to foreign creditors, with the company also holding 14.7 billion yuan in contingent liability guarantees to foreign companies. The exact amount would need to be determined by the bankruptcy court. Gitic assets were valued at 21.47 billion yuan, substantially lower than the 35.87 billion yuan originally estimated by Gitic. It was announced at the meeting that Gitic's 27,937 individual creditors would be repaid immediately 779 million yuan in principal owed through funds provided by the Guangdong provincial government. Overseas creditors would have to apply for repayment at bankruptcy proceedings -- a decision made by the Gitic board of directors. It was not revealed how the Gitic bankruptcy would be handled. While many bankers attending the meeting were bewildered, the liquidation committee head said that the mainland had clear regulations on how bankruptcy is handled, as contained in its bankruptcy law, company as well as civilian regulation. Bankers expressed disappointment over the central government's decision to allow Gitic to seek relief in bankruptcy court instead of the tacit arrangement of repaying the principal on loans registered with the State Administration of Foreign Exchange. Bankers said it was the tacit arrangement that allowed foreign financial institutions to overlook the lack of transparency of mainland provincial and city-backed firms and forego normal due diligence. Foreign bankers observed that much of Gitic's decision making was steeped in the political priorities of the province. Even the central government liquidation team found the investment firm less than forthcoming. According to the information made available yesterday, Gitic claimed ownership interest in 132 domestic and overseas companies. The clearance team, however, found interest in 240 firms. Likewise, Gitic claimed assets of 35.87 billion yuan, while the clearance team found assets valued at 21.47 billion yuan. GUANGZHOU INTERNATIONAL: To auction stake ----------------------------------------- According to the South China Morning Post and the Hong Kong Standard, Guangzhou International Trust and Investment Corp (Gzitic) will auction today its 26.7 per cent stake in Guangzhou Securities to help repay interbank debt of US$1.5 million and 37.5 million yuan owed to Anhui International Trust and Investment Corp, the Yengcheng Evening News said. Anhui Trust won legal action against Gzitic in July last year for overdue payment of credits from the interbank market. The Anhui high court sealed Gzitic's entire securities stake and ordered the auction when Gzitic was unable to make payments in November. The newspaper quoted Guangzhou municipal government committee on economic reform head Lu Jingkui as expressing reservations about the auction. Mr Lu believed shares in a state-owned brokerage should not be auctioned like any other commodity. HOKKAIDO TAKUSHOKU BANK: Branch chief of failed bank held --------------------------------------------------------- According to the Hong Kong Standard, a former manager of failed Hokkaido Takushoku Bank's branch in Hokkaido, Yosuke Nakagawa, was arrested yesterday on suspicion of giving 70 million yen in illegal loans to a local charcoal dealer. Police also arrested Junichi Kimura, former president of the charcoal-producing and marketing company Tokai. Nakamura allegedly gave the loans to the firm through a dormant company between August and October 1994, although he knew that it would be difficult to recover the funds. The Sapporo-based bank collapsed in November 1997 with liabilities totalling 1.15 trillion yen. North Pacific Bank and Chuo Trust and Banking took over operations of the failed bank in November last year. LUEN FAT HONG INTERNATIONAL: Luen Fat Hong seeking $36m ------------------------------------------------------- According to the South China Morning Post, plastic-products maker Luen Fat Hong International Holdings plans to raise $36 million through a rights issue to finance a Dongguan joint venture. In September, Luen Fat Hong claimed it had not breached stock exchange listing rules by temporarily changing the use of proceeds from a share placement in 1997. According to the company's annual report, about one-third of the $80 million raised was used to cut short-term debts instead of financing a project for PVC materials. The stock exchange is understood to have expressed concern about the move. The company's financial controller denied the company had changed the use of the proceeds, maintaining it would be able to retrieve the proceeds if the PVC project pushed ahead. ========= J A P A N ========= ASATSU-DK: Results announcement ------------------------------- Bloomberg reports shares of Asatsu-DK Inc. fell 35 yen to 2,565. The Japanese advertising agency probably posted a net loss of about 5 billion yen ($45 million) for the year ended in December, down from a profit of 9 billion yen the previous year, the Nihon Keizai newspaper reported, without citing sources. The company, formerly known as Asatsu Inc., may post an extraordinary charge of more than 9 billion yen because of a decline in value of its bank stock holdings and a decline in value of shares in WPP Group of the U.K., an advertising company, because of the stronger yen. MITSUKOSHI: To sell its stake in Tiffany ---------------------------------------- Singapore Business Times and the Financial Times report Mitsukoshi, the troubled Japanese department store, is selling its stake in Tiffany & Co, the upmarket jeweller, it said on Friday. The move represents yet another retreat by Japanese companies that bought trophy assets in the US during the "bubble" period of the late 1980s and early '90s. Mitsukoshi acquired a 10 per cent stake in Tiffany from GE Capital in 1989. The Japanese group, which is Tiffany's biggest shareholder with a 12 per cent stake, said it would dispose of its holding in a public offering by the end of next month. It would sell at least 3.88 million shares, and possibly a further 390,000 in case of heavy demand. At Thursday's closing price of 57 13/16, the 4.27 million shares would fetch about US$247 million (S$412.5 million). Proceeds will be used for general corporate purposes, store renovation and expansion. The 325-year-old company faces financial and structural problems. Its net debt-to-equity ratio is 10 times, compared with an average of 1.3 times for other Japanese department stores, according to Salomon Smith Barney. In addition, the equity base is expected to fall from 75.1 billion yen (S$1.1 billion) to 33.4 billion yen on a consolidated basis this year because of extraordinary losses relating to a write down on the value of golf course properties bought during the "bubble" period. Worse, Mitsukoshi's underlying businesses are performing poorly. Its flagship store is in Tokyo's Nihonbashi district, an area becoming increasingly unfashionable among shoppers. ========= K O R E A ========= HANBO IRON & STEEL: Creditors assure Washington on sale ------------------------------------------------------- According to a report in the Korea Times, a report filed to the US Congress by the Clinton administration stated that the Korean government has promised the US that it will not provide either direct or indirect support to the bankrupt Hanbo Iron & Steel Company. The report also said that commitments were received from Hanbo's creditors that the company will be sold based on market mechanisms. This report addressed concerns of the American industry and the growing call for Washington to impose trade sanctions against foreign steel makers. It also outlined the US government's commitment to monitor stated Korean policies to wipe out subsidies to the local Korean steel industry. HANBO IRON & STEEL: Interest in buying Hanbo is weak ---------------------------------------------------- According to a report in the Korea Times, letters of intent from prospective purchasers of the bankrupt Hanbo Iron & Steel Company are due by January 12. However, only the Dongkuk Steel Mill Company of Korea so far has expressed any interest in buying Hanbo. The article also mentioned Dongkuk's displeasure with the attitude of the creditor banks, which aborted bidding because they felt that Dongkuk's offered price failed to meet their expectations. Creditor banks were reportedly seeking to lure foreign enterprises into a competition for the take over of what was once Korea's second largest steel maker. Hopes are that this would increase bids and maximize revenues from the sale. However, it now appears that they may have to engage in negotiations with Dongkuk alone, who has offered 1.720 trillion won. Creditor banks prefer to sell off Hanbo's two main plants as a package, but they could be sold off in separate parts contingent on buyer interest. Hanbo's main facility is its Tanjin Steelworks which includes a mill producing 1.8 million tons of crude steel a year for hot coils and steel rods, as well as a cold-rolled steel plate plant that suspended operations this last July. The other part of the company comprises uncompleted facilities (whose construction was stopped last year) that were slated to become a 2.1 million ton hot coil mill and a 2 million ton cold-rolled sheet plate plant. Hanbo at one point produced 3 million tons of steel products per year, but the company collapsed on January 23, 1997 under bank debts estimated at 8 trillion won. The value of the assets at Hanbo have been evaluated at 3.4 trillion won, although the construction of some facilities is still not complete. Bankers Trust Company (BTC) of the US has been commissioned to organize the sale of Hanbo. HYUNDAI: Hyundai 332.6% debt-to-equity ratio cited -------------------------------------------------- A report in the Korea Herald mentioned that the Hyundai Group's debt-to-equity ratio stood at 332.6 percent as of the end of 1998. In efforts to reduce this to 200 percent as required by the government by the end of this year, it has announced an ambitious plan to spin off a total of 11 subsidiaries through disposals, mergers, or liquidations. HYUNDAI MOTOR: To sell off car seat division to US firm ------------------------------------------------------- The Digital ChosunIlbo reports Hyundai Motor announced Thursday that it has signed a letter of intent to sell its auto seat manufacturing division to the Lear Co. of the United States, at a price of W100 billion. To move forward with the sell-off, a joint first-hand investigation of Hyundai's production plant in Pusan will be held for two months before signing of the formal sales agreement. The two companies agreed that Lear will accommodate the 605 workers currently employed, and will jointly develop new products with Hyundai. The US firm, based in Detroit, is the world's top auto seat manufacturer, with an annual turnover of more than $US7.3 billion. HYUNDAI US SEMICON: S&P maintains minus rating ---------------------------------------------- The Digital ChosunIlbo reports Standard & Poor's, the American investment evaluation firm, announced Friday that it does not plan to adjust the credit outlook for Hyundai Semicon America, Hyundai's local firm in the US, despite its planned 'big deal' merger with LG Semicon. It is currently rated 'B' class, on a negative watchlist. S&P pointed out that while Hyundai may achieve expansion in scale by absorbing LG Semicon, the details have not yet been confirmed. Moreover, S&P said, Hyundai Electronics itself is in need of restructuring, citing its excessive production plant facilities, and also suffers from fluctuations in the DRAM market. KONGJU KEUMSUNG CREDIT CO-OP: Co-op is bankrupt ----------------------------------------------- The Taechon District Court advertised in the Korean language Maeil Kyungje that the Kongje Keumsung Credit Co- op went bankrupt. The co-op's address is 147-28 Chung-dong, Kongju-shi and the president is Mr. Ji Sang-jun. KWANGMYUNG ELECTRONICS: Begins liquidation procedure ---------------------------------------------------- According to the Korean language Maeil Kyungje's Business Brief section, the Suwon District Courts has allowed the Kwangmyung Electronics Company to start a liquidation procedure. PAEKJE CENTRAL CREDIT CO-OP: Co-op is bankrupt ---------------------------------------------- The Taechon District Court advertised in the Korean language Maeil Kyungje that the Paekje Central Credit Co-op went bankrupt. The co-op's address is 1285-5 Jeungsan-ri, Suksung-myon, Puyo-gun, Chungnam and the president is Mr. Yi Dae-woo. =============== M A L A Y S I A =============== RHB BANK: Off rating watch -------------------------- Business Times reports Rating Agency Malaysia Bhd (RAM) has lifted the rating watch on RHB Bank Bhd and reaffirmed the bank's short-term rating of P1. However, RHB Bank's long- term rating has been downgraded to AA3 from AA2 due to the large decline in the quality of the bank's loan portfolio, including the merger with RHB Finance Bhd and the exposure to its offshore banking unit. RHB Bank's proposed RM500 million subordinated bonds (1999/2009) have been accorded a long-term rating of A1. However, RAM said, the bank's ratings are strengthened by positive factors such as a merger with a "clean" Sime Bank Bhd that will enlarge RHB Bank's asset base and strengthen its funding and liquidity position with a large and stable retail deposit base. Furthermore, RAM said, the proposed acquisition of non-performing loans by Pengurusan Danaharta Nasional Bhd will elevate RHB Bank's asset quality position and result in a stronger balance sheet. Following the rating downgrade of RHB Bank, RAM has downgraded the debt issue of Naluri Bhd's RM600 million bank guaranteed bonds, which are guaranteed proportionately by the bank, to AA3(bg) from AA2(bg). RENONG: Toll firm to anchor debt-hit Renong ------------------------------------------- According to the Hong Kong Standard, Malaysia's biggest toll road operator, Projek Lebuhraya Utara Selatan (Plus), will anchor a revised plan to restructure debt-laden conglomerate Renong and its associates, government officials said yesterday. The new plan, while not yet final, would scrap a proposed government guarantee for long-dated debt to replace existing loans and bonds of the Renong group. The new arbitrator set up by the central bank, the Corporate Debt Restructuring Committee (CDRC), was seeking to convince Renong's creditors that the group's loans and bonds could be replaced by paper issued by Plus. ===================== P H I L I P P I N E S ===================== PHILIPPINE AIRLINES: New consultants to meet with creditors ----------------------------------------------------------- According to the South China Morning Post, bankrupt Philippine Airlines (PAL) has signed five-year contracts to hire, and effectively handed over the reins to four executives from Cathay Pacific Airways as a move to pacify creditors sceptical about its ability to survive. Mr Peter Foster, originally Cathay Pacific general manager, said PAL shareholders had made a commitment of capital infusion and guaranteed comprehensively that there will be the required levels of investment. PAL had entered into a binding agreement to follow the advice of the new management team. With Mr Foster at the new management team are Mike Scantlebury, a finance director at Taikoo Motors with previous experience in aircraft financing; Andrew Fyfe, Cathay's general manager in Germany, Austria and Scandinavia; and Richard Wald, Cathay's head of maintenance in France. Mr Foster said a fifth individual not necessarily from Cathay or the Swire Group would be added to take charge of marketing and operational duties at PAL. The report says that the four are hired through consultancy firm Regent Star Services. According to the Hong Kong Standard, the four are not hired by PAL. Instead they set up the consultancy firm Regent Star Services which has secured a five-year contract to provide PAL with managerial and technical assistance. Mr Scantlebury said that in the medium-to-long term the consultancy would take up assignments from other airlines, but presently it would concentrate on PAL. The four will begin working for PAL officially next Wednesday. Mr Foster said his team's first key task would be to regain creditor confidence and their approval for the rehabilitation plan, which is believed to involve an immediate cash infusion of $90 million from Mr Tan and another $60 million within half a year, hopefully by a new partner. He said the next step would be to resolve PAL's labor difficulties. =============== T H A I L A N D =============== NATIONAL PETROCHEMICAL: Debenture issue sells out first day ----------------------------------------------------------- The Bangkok Post reports National Petrochemical Plc (NPC)'s issue of 800-million baht worth of unsecured debentures was fully snapped up by private buyers on January 4, the day of issue, the company announced yesterday. The issue was designed to raise fund for the company to repay its dollar-denominated loans. The debentures, which are redeemable in three years, carry an interest rate based on commercial banks' one-year fixed deposit rate of between 6% and 6.5%. SG Asia Credit Plc was appointed as the arranger. An informed source in the company said all subscribers were local financial institutions. The company plans to issue two more tranches over the next two years, the first being next year. SHINAWATRA COMPUTER: SC&C plans to raise paid-up capital -------------------------------------------------------- The Nation reports Shinawatra Computer and Communications Plc (SC&C) will raise its paid-up capital by Bt1.39 billion to Bt2.77 billion in order to restructure its financial position as the company dilutes its shares in Advanced Info Services Plc (AIS). The dilution of its stake in AIS will help reduce Shinawatra's debt, but SC&C's consolidated profits will also disappear by 20 per cent, an analyst at Thai Securities Co Ltd said. The analyst said the transactions with Singapore Telecom Ltd will cause SC&C to hold only 42 per cent stake in AIS, and the holding will be lowered to 40 per cent by the end of this year. He added that AIS has normally contributed about 50 to 60 per cent of SC&C's total revenue. Meanwhile, SC&C said it will issue 138.6 million new shares in a rights issue -- the plan is awaiting shareholder approval at a meeting on Feb 10. After the new share issue, SC&C will have a registered capital of almost Bt3 billion, with remaining unallocated shares totalling Bt228 million. SC&C said in a filing to the SET that the capital increase is to reduce the burden of servicing its loans, including those made by foreign lending institutions. SC&C is also burdened with about Bt3 billion to Bt4 billion debt from its subsidiary, Shinawatra International Plc (INT) after the subsidiary showed a huge loss from its investments in India and Philippines. TELECOMASIA: Denies share sale to BBL ------------------------------------- The Bangkok Post reports TelecomAsia has denied reports that the CP Group had sold off its shares in the telephone company to Bangkok Bank. The CP Group and its subsidiaries had not sold any of their holdings in TelecomAsia or reduced their majority shareholding in any way, TA in a statement. Last week, Bangkok Bank announced that it had purchased a 5.17% stake in TelecomAsia for 1.3 billion baht. Bank executives said the transaction was part of a debt-for- equity swap and asset-restructuring with foreign investors of TelecomAsia. TOTAL ACCESS: TAC under pressure for partner -------------------------------------------- The Nation reports after going through initial debt- restructuring last year, Total Access Communication (TAC), the country's second largest cellular phone service operator, is now feeling the heat from the Advanced Info Service-Singapore Telecom partnership. TAC is said to be forging a partnership with Norway's national telecom carrier, Telenor, in which the latter is offered a 25-per cent stake. Both have completed due diligence, pending a final decision from the firms' management, according to a TAC source. TAC's parent United Communication Industry's ongoing talks with creditors is one of the factors contributing to the delay. Ucom executives said earlier that the roll-over of Ucom's debts should be finished in February. Thana Thienachariya, TAC's senior finance manager, however, refused to confirm the potential partner of TAC, saying: "There are other carriers TAC is in talks with." Regarding the AIS-SingTel partnership, Thana admitted that the deal will force TAC to step up its search for a strategic partner. Thana said TAC, however, will select a strategic partner which is different to AIS. 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 1999. All rights reserved. ISSN: 1520-9482. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR -- Asia Pacific subscription rate is $575 for 6 months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *