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/raid1/www/Hosts/bankrupt/TCRAP_Public/990825.MBX T R O U B L E D C O M P A N Y R E P O R T E R A S I A P A C I F I C Wednesday, August 25, 1999, Vol. 2, No. 165 Headlines * C H I N A & H O N G K O N G * ENGLONG INTN'L: Delisting puts more firms on brink STIME WATCH INTN'L: In debt restructuring talks - * K O R E A * DAEWOO GROUP: Subsidiaries face workout plan DAEWOO MOTORS: GM visits factories, preliminary to talks KOREA LIFE: Private investment to defy government plans SAMSUNG GROUP: Agreement with creditors reached * M A L A Y S I A * PANTAI HOLDINGS BHD: Posts annual loss PUNCAK VISTA SDN: UEM unit still can't repay loans SOUTHERN STEEL BHD: Posts first-half loss SYARIKAT KAYU WANGI BHD: Posts first-half loss * P H I L I P P I N E S * ORIENT BANK: Allied Bank seeks aid from gov't regulators PHILIPPINE AIRLINES: MIASCOR bids for some of assets PHILIPPINE REALTY: In talks for debt-for-equity swap UNIWIDE GROUP: SEC orders ING Bank not to sell assets * T H A I L A N D * CHAROONG THAI WIRE: Posts first-half loss ITALIAN-THAI DEVELOPMENT: Debt rollover brightens picture KHUNYING PATCHAREE WONGPAITHOON: Creditors closing in KRUNG THAI BANK: Probe to be conducted independently NAKORNTHAI STRIP MILL: S&P downgrades corporate ratings PANJAPOL PAPER: Gets court order to rehabilitate SAMMAKORN PLC: To sell stake in Danacom THAI FARMERS BANK: Posts first-half loss THAI FILM INDUSTRIES: Ends debt restructure,shares to BBL THAI OIL CO.: Cabinet to thrash out details of debt plan TOTAL ACCESS COMMOS.: Nears deal with Bell Canada ============================== C H I N A & H O N G K O N G ============================== ENGLONG INTN'L: Delisting puts more firms on brink -------------------------------------------------- Nine companies face the risk of losing their listings on Hong Kong's stock exchange, following yesterday's delisting of Englong International, as the exchange steps up enforcement of rules on prolonged suspensions. Each of the nine companies have been suspended from trading by the stock exchange for more than three months. Three of these companies are in the final stage of the exchange's delisting process. Under stock exchange rules, if these companies are to stave off delisting, they need to have restructuring proposals accepted by the exchange within six months from when final delisting procedures began. The three companies are: Rhine Holdings, Yaohan Hongkong and Chintex Oil & Gas, owned by former legislator Chim Pui- chung. Yaohan will be the next company to be delisted if it does not put forward a valid restructuring proposal by September 15. Rhine is facing a January 12 deadline. However, Chintex, which has been suspended from trading since September 1, 1989, has already submitted a restructuring proposal. The plan, which has been approved by the exchange in principle, is still subject to shareholder approval. The other six companies have not reached the final stage of the stock exchange's delisting process. The exchange introduced procedures to delist companies with prolonged suspensions last February. The exchange delisted Englong International yesterday after the company failed to submit a valid resumption proposal before a June 17 deadline. On July 13, the exchange cancelled the listing of collapsed investment bank Peregrine Investments under its delisting procedures. The stock exchange's enforcement of its delisting rules for companies with prolonged suspensions have generally been welcomed by brokers. Standard Capital Group executive director Louis Tse Ming-kwong said the stock exchange should delist companies that have been suspended for several years. "For small shareholders, it would not be a big difference between a delisting and a continued suspension," Mr Tse said. "In both cases, small investors cannot cash in their investments in the companies." Hung Sing Securities director Gilbert Cheung Yik-cho said the delisting of companies with prolonged suspensions was the only solution. "Many of these companies have financial problems," Mr Cheung said. "It would not be appropriate to request them to resume trading." However, Hong Kong Stockbrokers Association chairman Dannis Lee Jor-hung said the delisting of Englong would discourage investors from trading in second and third-tier firms. He said the stock exchange needed to take into account the interests of retail punters. "I think the exchange has to consider how many minority shareholders would be affected under the delisting plan of a company," he said. "If there are a lot of investors going to be affected in a delisting plan, the exchange should not make such a decision." (South China Morning Post 24-Aug-1999) STIME WATCH INTN'L: In debt restructuring talks - ----------------------------------------------- Debt-laden watch-maker Stime Watch International Holdings is in talks with two potential investors on a possible debt restructuring and buy-out. One of the investors was a Taiwanese watch and jewellery- maker, while the other was from the mainland, financial controller Kenneth Sin said yesterday. Mr Sin said the success of the talks depended on the attitude of creditor banks. He said the firm had about $170 million of bank loans, while its cash in hand amounted to only "a few hundred thousand dollars. We hope the negotiations can be finalised in the next two to three months." Mr Sin said a liquidity squeeze had forced the firm to shrink its business, further reducing its profit margin. For the year to December 31, Stime recorded turnover of $190.73 million, almost 44 per cent lower than in 1997. It posted a $164.3 million loss for the year, compared to a $125.7 million loss in 1997. (South China Morning Post 24-Aug-1999) ========= K O R E A ========= DAEWOO GROUP: Subsidiaries face workout plan -------------------------------------------- In a bid to ease the worsening financial condition of the Daewoo Group units, the government will put some of them under an early rehabilitation program regardless of the group's recent accord with creditors on sweeping restructuring, a senior financial regulator said yesterday. The government has been implementing this principle in improving the financial status of the ailing private sector. A high ranking government official had said Monday that there had been a meeting of top government economic policy makers including Minister of Finance and Economy (MOFE) Kang Bong-kyun, Financial Supervisory Commission (FSC) Chairman Lee Hun-jai, and Chief Presidential Economic Advisor Lee Ki-ho on Sunday and that they agreed to implement the scheme to take care of the Daewoo problem. A government official said the basic government position on the restructuring of Daewoo is that a workout program will be enforced only if the overhaul is not proceeding well. "But if the current liquidity problems of some units continue, they may face the risk of collapsing even before the six month period for the group restructuring is over, prompting the talk of an early workout plan," he said. The workout program will be imposed on Daewoo affiliates facing serious liquidity crises even before the group completes its overhaul plan, Lee said. A workout program usually entails a temporary freeze on the debts of a company, while its creditor banks provide it with operational funds. Debt rescheduling or write-offs can be granted as well. The government official said that the Daewoo workout plan consists of a government commitment to provide Korea's second largest business group with bailout measures including debt to equity swaps and capital injections. The official also said that the administration's guarantees will eliminate any jitters in the financial market. "Concerning Daewoo's restructuring, we are mulling all possibilities," FSC spokesman Kim Young-jai said yesterday. "However, nothing has been decided yet." But analysts said that the government will have no choice but to put some Daewoo units under a rehabilitation program in light of their serious credit shortages. The government only needs to decide when to implement the workout program and which Daewoo units to subject to it, they said. However, the two government offices in charge of private sector restructing, FSC and MOFE are known to be split over specific steps of the bailout plan. The same official said, however, that the exact timetable for implementing the workout policy could be postponed until next week as the whole plan needs to be agreed by Daewoo's Chair Kim Woo-Choong, who is now on a business trip abroad. Meanwhile, Daewoo Corp., the group's trading and construction unit, said yesterday that the company will continue its trading business despite the group's restructuring program. Presiding over a meeting of senior company officials, Daewoo President Chang Byong-joo urged them to step up publicity activity in order to dissipate misunderstandings among foreign buyers and domestic suppliers that it will be reorganized into an auto-related firm. In addition, the company aims at posting an annual turnover of 30.6 trillion won and exporting products worth $20 billion by the year 2002. (Digital ChosunIlbo 24-Aug- 1999; Korea Herald 25-Aug-1999) DAEWOO MOTORS: GM visits factories, preliminary to talks -------------------------------------------------------- About 20 representatives from General Motors (GM) arrived here yesterday to visit the factories of Daewoo Motor and hold talks with Daewoo Motor President Kim Tae-gou over a proposed tie-up, industry sources said. The asset-evaluation visit is expected to open full-scale negotiations on strategic cooperation, as it is the first time for GM officials to visit Korea in large numbers after the two companies exchanged a memorandum of understanding (MOU) Aug. 6. Earlier last week, Daewoo Motor President Kim met with top GM managers at the firm's headquarters in Detroit. "It is not known whether the GM officials will make a full- fledged inspection during their visit this time or engage in detailed negotiations, as the bilateral talks are still in the early stages," said a source. According to some observers, the troubled Daewoo Group has already agreed to hand over a more than 60 percent stake in the auto affiliate's passenger car operations to the U.S. giant. (Korea Herald 25-Aug-1999; Digital ChosunIlbo 24- Aug-1999) KOREA LIFE: Private investment to defy government plans ------------------------------------------------------- Panacom, a U.S. company assisting former Korea Life Insurance Chairman Choi Soon-young in his desperate effort to retain the insurance firm, has decided to make a 50 billion won equity investment by Aug. 30, defying the Seoul government's plan to nationalize the company. Korea Life yesterday decided at a meeting of the board of directors to issue 10 million new shares with face value of 5,000 won per share, handing all of them to its U.S. savior. If the U.S. company makes the announced equity investment, it risks losing the entire 50 billion won because the Financial Supervisory Commission is determined to eliminate all outstanding shares before injecting public funds. An FSC official said he does not believe Panacom will be foolish enough to take on the risk. "It may be a gesture to get a favorable verdict on the suit filed by Choi to invalidate the commission's measures against Korea Life," he said. The ruling on the suit will be made Aug. 31. The U.S. company has offered to buy Korea Life through a capital investment of 2.5 trillion won but the FSC instantly rejected the proposal. The commission has already declared Korea Life insolvent and plans to infuse between 1.35 trillion won and 2.7 trillion won into the troubled insurer before auctioning it off. (Korea Herald 25-Aug-1999) SAMSUNG GROUP: Agreement with creditors reached ----------------------------------------------- The creditors group of Samsung Motors convened a meeting Tuesday after agreeing to accept Samsung Business Group's proposal to pay W2.45 trillion to compensate for the auto company's expected losses by the end of next year. "Samsung will assume 2.45 trillion won by whatever [means they choose] to secure the money by the end of next year," a Hanvit Bank spokesman said. The conglomerate will present a written pledge soon for endorsement by creditors, he said. In return, creditors will cancel plans to hit it with punitive financial sanctions. The creditors group has been in a tug-of-war with Samsung for more than 2 months over the issue of how the business group should pay off the W2.8 trillion in debts of Samsung Motors. Two months ago, Samsung Group chair Lee Kun-hee agreed to contribute 4 million shares of Samsung Life as payment for the debts. However, Samsung and the creditors group differed widely on what should be done in the event that the value of the donated stocks should fall below the full amount of the debt. According to the creditors group, Samsung chair Lee will hand over 3.5 million shares to the creditors group and another 500,000 shares to compensate Samsung Motors's suppliers and subcontractors for a total contribution of 4 million shares. The creditor group will commission the group to turn the shares into cash for a payment of W2.45 trillion to the creditors group and W350 billion to Samsung Motors's suppliers and subcontractors. Samsung chair Lee agreed to hand over an additional 500,000 shares if the total value of the shares falls short of W2.45 trillion. "If the amount is short of 2.45 trillion won, Samsung then will be required to buy subordinated bonds of creditor banks or subscribe to their rights issues," he said. The debt-laden carmaker sought protection from its creditors in June. It had suffered massive losses since its ill-fated birth at the height of South Korea's economic crisis in March last year. Samsung's new agreement was seen as another victory for President Kim Dae-Jung, who has battled to reduce the powers of sprawling family-owned business groups. Samsung was pressured to assume full responsibility for its disastrous auto venture. (Digital ChosunIlbo, Business Day 24-Aug-1999) =============== M A L A Y S I A =============== PANTAI HOLDINGS BHD: Posts annual loss -------------------------------------- Pantai Holdings Bhd recorded a group pre-tax loss of RM67.61mil for the year ended June 30, 1999 as compared to a pre-tax profit of RM252.77mil the previous year. This was the result of a 28.4% drop in turnover to RM116.06mil from RM102.1mil previously. (Star Online 24-Aug-1999) PUNCAK VISTA SDN: UEM unit still can't repay loans -------------------------------------------------- Construction group United Engineers (Malaysia) Bhd said yesterday that its associate Puncak Vista Sdn Bhd was still in default on the payment of principal on two facilities worth a total of 393 million Malaysian ringgit (S$173 million). (Reuters; Business Times 24-Aug-1999) SOUTHERN STEEL BHD: Posts first-half loss ----------------------------------------- Southern Steel Bhd recorded a lower pre-tax loss of RM30.09mil for the six months ended June 30 compared to a loss of RM86.012mil in the corresponding period last year. Turnover dropped 8.3% to RM381.79mil from RM416.56mil previously. The company expects its performance for the second half of the year to continue to improve. (Star Online 24-Aug-1999) SYARIKAT KAYU WANGI BHD: Posts first-half loss ---------------------------------------------- Syarikat Kayu Wangi Bhd recorded a higher group pre-tax loss of RM3.94mil for the six months ended June 30, 1999 compared to RM1.98mil loss in the corresponding period last year. This was despite a higher turnover of RM103,000 from RM59,000 previously. (Star Online 24-Aug-1999) ===================== P H I L I P P I N E S ===================== ORIENT BANK: Allied Bank seeks aid from gov't regulators -------------------------------------------------------- Lucio Tan-owned Allied Banking Corp., which is set to pay one billion Philippine pesos (PhP) (US$25 million at PhP39.543:US$1) for the right to run the 52 branches of failed Orient Commercial Banking Corp., now wants regulators to extend PhP1.8 billion (US$46 million) in cash assistance to service depositors. "Where do you think Allied Bank will get the money (to pay for the first batch of deposit withdrawals)? That's why there is a PhP1.8-billion funding assistance," the bank is asking from the Bangko Sentral (Central Bank of the Phils.) and the Philippine Deposit Insurance Corp. (PDIC), PDIC executive vice-president Ricardo Tan yesterday told BusinessWorld. Allied Bank won last Tuesday's bidding for Orient Bank with its PhP1-billion offer, but the payment will not cover Orient Bank's PhP2.4-billion (US$61 million) emergency loans and PhP1.1-billion (US$28 million) emergency advances with the central bank, and PhP900 million (US$22.8 million) from the PDIC. As far as Allied Bank is concerned, it will only assume Orient Bank's deposit liabilities and run its 52 branches, in exchange for PhP1.8 billion (US$46 million). "After that, wala na (no more)," said Bangko Sentral deputy governor Alberto V. Reyes said. Allied Bank has also proposed that it will allow only 20% of Orient Bank's deposits to be withdrawn and the rest would be kept with the bank for five years earning a 2% annual interest, Mr. Reyes said. However, this scheme, as well as the PhP1.8-billion in assistance that Allied Bank is asking, are still subject to approval by the regulators. He said the central bank has started to foreclose on all the collateral pledged by Orient Bank and Ever Gotesco Group owner Jose Go to raise enough cash to cover the debts with the central bank. "All the collateral are now being foreclosed, including the property of Mr. (Jose) Go and his brothers," said Mr. Reyes. He said the central bank has identified more than 500 titles Mr. Go and his brothers own. These, he said, can be used by the Bangko Sentral to "attach" to the foreclosure papers it will submit to the courts. "These will be used to cover the uncollateralized overdrafts," said Mr. Reyes. He said the PDIC has also started to liquidate Orient Bank's PhP3-billion (US$76 million) assets to pay off Orient Bank's remaining obligations. "PDIC is the receiver-liquidator and Orient Bank is currently under liquidation," PDIC's Mr. Tan said. "So when (a bank) is under liquidation, we sell off the assets (to cover the bank's outstanding obligations)." However, he said while the Bangko Sentral's exposure is fully backed by first-class collateral pledged when the bank was granted emergency loans, "PDIC's exposure is simply what we've already paid (to insured depositors) ... for subgrogated claims, in effect." This means the central bank could start foreclosing on the assets of Orient Bank, but the PDIC would have to wait for the proceeds from the auction to pay off insured depositors. The PDIC official also clarified that Allied Bank only won the license to operate Orient Bank's branches, and did not acquire the bank's premises. "They are not acquiring assets. They are just assuming the uninsured deposits and the right, within two years, to establish 52 branches -- especially in those localities which need banking services because of the closure of Orient," he said. He added Allied Bank, as well as other banks, may still bid for Orient Bank's premises, loan portfolio, and other fixed assets. PDIC's Mr. Tan said uninsured depositors will have to assign their claims to Allied Bank by executing a deed of assignment. Mr. Reyes, however, said the Allied Bank proposal has yet to be officially approved by the policy- setting Monetary Board, which meets every Friday. According to the report of the National Bureau of Investigation released to the media last year, Mr. Go used "dummy accounts" to go around the central bank's limits on insider lending or lending to directors, officers, stockholders and related interests (DOSRI). Orient Bank was closed last October 14 after failing to service withdrawals starting February 14 of the same year. The bank collapsed from heavy non-performing loans, most of which were made up of DOSRI loans. It had PhP2.3 billion (US$58 million) in uninsured deposits. (Business World 24-Aug- 1999) PHILIPPINE AIRLINES: MIASCOR bids for some of assets ---------------------------------------------------- In line with its thrust of broadening its passenger and cargo handling operations, the Manila Integrated Airport Services Corp. (Miascor) formalized last week its bid to acquire a number of Philippine Airlines, Inc.'s (PAL) ancillary business. In a letter to Securities and Exchange Commission (SEC) chairman Perfect R. Yasay, Jr. Miascor chairman Jovino G. Lorenzo, Jr. said the company acknowledges the commission's policy of "obtaining the best prices for the sale of PAL's valuable non-core assets and not allowing sweetheart deals." "We know the auction process would be the best way of achieving your process (of getting the best price for PAL's assets)," Mr. Lorenzo said. The local ground-handling firm is optimistic about the sale of PAL's non-core assets since there is now a permanent receivership committee to oversee the disposal of the airliner's assets. Miascor also expressed its full support to the SEC's decision to appoint "independent and credible personalities with proven management skills and outstanding reputations as representatives -- SEC representative Renato Francisco, former Petron chairman Monico Jacob, and SGV partner Carlos Alindada -- to the permanent receivership committee. The Delgado-owned firm first expressed interest in bidding for the maintenance and repair facility, ground handling units and catering unit of the debt-ridden flag carrier in a letter to PAL president Avelino L. Zapanta. Miascor -- one of the major firms in the country's cargo and passenger handling sector -- earlier asked PAL for the details of the possible take-over of the said businesses. Mr. Lorenzo also asked for information on how to go about a due diligence to put forward a serious offer for the non-core assets. Meanwhile, Miascor recently forged a joint-venture agreement with Swissport, the ground-handling subsidiary of the SAir Group, involving the latter's acquisition of 40% of Miascor's Ground Handling Corp. With the entry of Swissport, Miascor plans to expand its regional presence to other major airports in Asia. (Business World 24-Aug- 1999) PHILIPPINE REALTY: In talks for debt-for-equity swap ---------------------------------------------------- Hit by temporary illiquidity as a result of the financial crisis, listed real estate developer Philippine Realty and Holdings Corp. (PhilRealty) is negotiating for a payment- in-kind arrangement with creditor banks for its more than two-billion-peso (US$51 million at PhP39.453:US$1) debt, banking sources said. Sources said PhilRealty -- controlled by the Lanuza family -- is offering various land properties to the banks as payment for its obligations through dacion en pago (debt- for-asset swap). PhilRealty officials cannot be reached for comment. As of February, the real estate company owes Metropolitan Bank and Trust Co. (Metrobank) 1.6 billion Philippine pesos (PhP) (US$41 million); Land Bank of the Philippines (Landbank), PhP500 million (US$12.67 million); Philippine National Bank (PNB), PhP38.6 million (US$978,000); and Urban Bank, PhP14 million (US$355,000). Pilipinas Bank also has an exposure to the company, the sources said. The figures exclude interest charges. PhilRealty's debts to Landbank have reportedly gone "past due," while those with the other creditor banks are still "current," the sources said. In a disclosure to the Philippine Stock Exchange (PSE) yesterday, the real estate firm said it is "negotiating for a debt-for-property swap with Metrobank" and has offered land as payment. "Negotiations are still ongoing. There is no final agreement yet. We have yet to agree on the valuation of the properties," a source from one of the creditor banks said. The source added that the creditor banks' internal appraiser is quoting a "conservative" or below-market valuation on PhilRealty's assets, as the holding cost has to be factored in. Since the assets cannot be sold immediately, it will be considered non-earning, the source added. The source said PhilRealty prefers a debt-for-asset swap arrangement rather than restructure its loans to "substantially reduce its obligations" to the banks. "Their collateral has high value. The company is not insolvent. They are just suffering from temporary illiquidity. Their cash flow is not sufficient to pay off their loans," the sources said. Earlier, the source said PhilRealty "promised" to use the proceeds from the sale of its 10.44% stake in International Exchange Bank (iBank) as payment to a portion of its loans to the creditor banks. "The company was selling its iBank shares before," the source said. Creditor Metrobank was reported to be eyeing the Lanuzas' stake in the bank as payment to PhilRealty's loans in the bank. Metrobank, however, denied this news. The real estate company's problems began during the 1997 currency crisis, when lending rates rose and sales plummeted in the real estate sector. "Before the crisis, PhilRealty has no problem. 'Yung mga bangko pa nga ang naghahabol sa kanila para magpa-utang (Banks were even eager to lend to the company)," the source said. PhilRealty went into land banking and construction of condominium units prior to the crisis. PhilRealty shares closed unchanged yesterday at PhP0.35. (Business World 24-Aug-1999) UNIWIDE GROUP: SEC orders ING Bank not to sell assets ----------------------------------------------------- The Securities and Exchange Commission yesterday ordered ING Bank to honor a debt moratorium and stop the foreclosure and sale this Thursday of the assets of the cash-strapped Uniwide Group of Companies. The SEC hearing panel, chaired by SEC chairman Perfecto R. Yasay, told ING Bank to "cease and desist from proceeding with the scheduled extrajudicial sale on Aug. 26 or on any subsequent date until further orders." It also required ING Bank country manager and president Ponciano F. Espiritu and the bank's board of directors to show cause why they should not be cited in contempt or disobedience of the 60- day temporary debt suspension order issued by the commission last July 29. "It should be stressed that the suspension order dated June 26 and the subsequent order dated July 29, have the effect of preventing any creditor from proceeding against any (Uniwide) properties or assets on which said creditor holds a security for the payment of obligations," the SEC said. The SEC order prevents ING Bank from conducting an extrajudicial sale of some 218 parcels of land in Naic, Cavite to cover the accrued debts of Uniwide of over 27.41 million Philippine pesos (US$694,750 at PhP39.543=US$1). According to the commission, the scheduled sale of the Cavite properties owned by Uniwide Sales Realty & Resources Corp. -- a member of the Uniwide Group -- "appears to be in outright defiance and contravention of a lawful order, which may constitute indirect contempt." The Uniwide group earlier said that if the sale of the Cavite properties pushed through, not only will the debt- laden group be prejudiced, but other creditors will also be discriminated against in a situation where all creditors should be on "equal footing." Last week, Uniwide said it will focus corporate recovery efforts on reviving its retail business. In fact, it has targetted a PhP500-million ($12.67 million) capital infusion, supposedly to come from a yet unnamed strategic partner, to service debts accrued by retail arm Uniwide Sales Warehouse Club, Inc. Uniwide also assured creditors Allied Bank, United Coconut Planters Bank and ING Bank that a specific plan and schedule of payment has already been drafted. It added that its properties are being appraised, and that once the SEC gives the go-ahead, creditors will be paid in kind. Meanwhile, another Uniwide creditor, Manila Electric Co. (Meralco), has asked the SEC to acknowledge its claims amounting to PhP31.62 million ($799,636), and not the retail firm's earlier computation of PhP15.65 million ($395,771). Meralco, however, has not threatened to cut services to Uniwide because of the suspension order issued by the SEC. Meralco also stressed that its claim should be recognized before the SEC decides on the merits of the proposed rehabilitation plan. (Business World 24-Aug- 1999) =============== T H A I L A N D =============== CHAROONG THAI WIRE: Posts first-half loss ----------------------------------------- Charoong Thai Wire and Cable yesterday posted H1 losses of 28.6 million baht, compared with profits of 52.6m last year. Q2 profits were 2.2m, compared with losses of 201.76m last year. (Bangkok Post 24-Aug-1999) ITALIAN-THAI DEVELOPMENT: Debt rollover brightens picture --------------------------------------------------------- Italian-Thai Development's vice president says the success of the company's $200 million debt extension will boost the company's credit when it comes to bidding for construction projects. ITD's creditors last week officially approved the roll over of debts for an additional five years. About 75 percent of creditors are foreigners. "After the debt extension, the company will have the capacity to seek loans" he added. As a result, ITD has entered into construction deals worth 35 billion baht in the first half of this year, expecting its revenue in the latter half to pick up from improving economy, said the company Vice President Chatichai Chutima. "We already have works in hand worth 35 billion baht. The value is expected to be higher in the latter half since the company has applied for bidding on several infrastructure projects such as the expansion project of Don Muang airport. Each project is valued at an average of around 3.5-4 billion baht," he said. However, the estimated revenue for 1999 should be relatively close to that of 1997's figure which was recorded at 24.78 billion baht. The company and its subsidiaries in 1997 posted a loss of 4.85 billion baht, but returned a 2.4 billion baht profit in 1998. Its revenue last year was extraordinary as ITD won the 6 billion-baht construction project for the Asian Games. (Business Day 24-Aug-1999) KHUNYING PATCHAREE WONGPAITHOON: Creditors closing in ----------------------------------------------------- Khunying Patcharee Wongpaithoon, who says she has no money to repay more than eight billion baht to creditors, is likely to be declared bankrupt soon. Khunying, daughter of Bhichai Rattakul, a deputy prime minister, earlier failed to meet a deadline set by the Civil Court for her to settle her debts or negotiate new terms. Her 19 creditors have now asked the court in Phayao province to declare her bankrupt. The legal process began last year. Bangkok Bank filed a civil suit against Industrial Syndicate Co, a company owned by Khunying Patcharee, for its failure to honour promissory notes worth 97.72 million baht. As well, the bank filed suits against Khunying Patcharee and her husband, Veeranond Wongpaithoon. The court ruled in favour of the bank, but the three defendants did not settle the debts. Bangkok Bank responded by filing a bankruptcy suit against Khunying Patcharee in January this year. In March, the court ruled in favour of the bank, and gave all of her creditors two months to file claims for debt repayments. It allowed Khunying Patcharee to negotiate repayments during the period. Negotiations were never held. When the deadline expired, the court made an unsuccessful bid to seize her assets. Khunying Patcharee had told the court that her assets were worth several billion baht, in the form of land, buildings and stocks. However, all of her assets had been transferred to the Financial Institutions Development Fund (FIDF) as loan repayments, she said. Khunying Patcharee was the former major shareholder and president of First City Investment Plc, which plunged into financial trouble in 1992 sparking heavy withdrawals. The company sought help from the FIDF, which asked the Industrial Finance Corporation of Thailand to take over the firm. In 1997, after the economic bubble burst, First City Investment was one of 12 companies ordered by the Finance Ministry to merge with Krungthai Thanakit Finance and Securities Plc. The enlarged finance house was later merged with Union Bank of Bangkok to become BankThai Plc. The Bank of Thailand has charged Khunying Patcharee, her husband and two other former executives of First City Investment, with illegally transferring almost 2.4 billion baht from the company into their personal bank accounts. The case is pending. (Bangkok Post 24-Aug-1999) KRUNG THAI BANK: Probe to be conducted independently ---------------------------------------------------- The Government yesterday announced plans to set up an independent investigation into state-owned Krung Thai Bank (KTB) following reports of questionable lending practices. Criticism is mounting from opposition politicians citing alleged lending irregularities by former management in a row that has cut to the heart of the government's banking sector reforms. The Finance Ministry said in a statement that it was approaching impartial outsiders to serve on a team to investigate KTB, which has bad loans equal to some 60 percent of total lending. "The prime minister and finance minister have confirmed that there will be transparent investigation without discrimination," a statement said. Finance Minister Tarrin Nimmanahaeminda said the committee would be chaired by an outsider in order to ensure fairness and objectivity. "The prime minister and I said on many occasions that the examination of Krung Thai Bank's operations must be done in accordance with the actual facts and in a transparent manner," Tarrin said. The bank leapt into the ranks of the country's biggest three last year when the government used it to help deal with sweeping industry restructuring in the wake of the Asian financial crisis. The storm of controversy was sparked earlier this month by criticisms contained in a leaked report by international auditors PricewaterhouseCoopers, which examined the bank's former management and lending procedures. Finance Minister Tarrin Nimmanahaeminda, whose brother formerly headed the bank, expressed confidence that KTB had nothing to hide but announced an investigation by the Finance Ministry and central bank. However, opposition politicians called for a fully independent probe. KTB vice president Pongsathorn Siriyothin earlier said the auditor's report had incorrectly estimated that non- performing loans accounted for about 80 percent of the bank's total credit extension. He said the bank's NPLs at the end of June stood at 393.5 billion baht (10.6 billion dollars) or 59.3 percent of total loans. KTB president Singh Tangtatswas criticized the leaking of the auditors' report, saying only sections critical of the bank were made public. Under its industry restructuring plans the government had merged First Bangkok City Bank (FBCB) with KTB, while the troubled Bangkok Bank of Commerce (BBC) transferred its good assets to it. The opposition claims the move, part of wider efforts to deal with bad loans which now account for nearly 50 percent of all lending by Thai institutions, was intended to cover up KTB's own debts. KTB denied the charges. The KTB Board of Directors in holding a meeting today, and the Financial Institutions Development Fund (FIDF) as KTB's largest shareholder has primary responsibility to decide on the matter of the position of the bank's chairman of the board. Specifically, the issue deals with extending the term of service of KTB Chairman Mechai Viravaidhya beyond August 31. An audit by PricewaterhouseCoopers using the sampling method estimated that KTB had nonperforming loans (NPLs) of 80 percent of total credit outstanding. Top KTB officials strongly criticized the audit, saying that it was inaccurate and incomplete and that the method of analysis was faulty. KTB claims that its NPLs were 59.3 percent at the end of March. Meanwhile, Fitch IBCA, and international ratings agency, estimated KTB's NPLs to be in the range of 60-70 percent. The Bank of Thailand (BOT), which is directly responsible for overseeing the reporting of NPL data from all financial institutions, has not taken a public stand on KTB's NPL level except to pass on the reports submitted by the bank. The BOT's lack of assertive action in getting at the true NPL figure has led to doubts over the accuracy and completeness of bad loan reports by other banks and finance companies, analysts said, adding that no system appears to be in place to ensure accuracy of NPL data. (Business Day 24-Aug-1999) NAKORNTHAI STRIP MILL: S&P downgrades corporate ratings ------------------------------------------------------- Standard and Poor's (S&P) yesterday downgraded the long- term corporate ratings for Nakornthai Strip Mill to default status. The downgrade lowers the company's rating to 'D' from 'SD' (selective default). Ratings on the $249 million in senior mortgage notes due in 2006, issued by NSM Steel (Delaware) and guaranteed by Nakornthai Strip Mill, were also lowered to 'D' from 'CC'. Ratings on the $203 million in senior subordinated mortgage notes due in 2008 issued by NSM Steel were maintained at 'D'. Standard and Poor's said the outlook on corporate credit ratings of Nakornthai Strip Mill "remained not meaningful". NSM missed interest payments of $15 million on the senior mortgage notes on August 1, as well as on February 1. Standard and Poor's noted that debt restructuring was under way to allow the company to continue operations. "With the cessation of operations since late 1998 after lightning struck the company's hot mill facility electrical substation, Nakornthai Strip Mill has very limited financial flexibility," the rating agency said. The key to any solution to the company's problem is a debt agreement with creditors, S&P said. The company hasn't been producing since late 1998, when lighting struck its main plant. Sawasdi Horrungruang, whose NTS Steel Group Plc is a major investor in the project, has said that it would take about $100 million to restart the mill. In the United States, meanwhile, investment funds that purchased almost $43 million of NSM notes are continuing with their lawsuit against the underwriters. The plaintiffs allege that the underwriters misled investors about the mills' status and capabilities. A group of funds managed by Farallon Capital Management LLC and Oaktree Capital Management LLC is seeking $33 million and other damages for investments in senior notes, senior subordinated notes and debentures. Underwriters that handled the issue included McDonald Investments Inc, which was recently appointed as a financial adviser by four Thai steel producers seeking to merge operations in a cost-saving drive. The other underwriters were Gleacher and Co, Natwest Group Holdings Corp, PaineWebber Inc. and ECT Securities LP. The suit alleges that the underwriters and others misled investors in selling $452.5 million of debt in March 1998. It claims they misrepresented the NSM plant's construction status, the quality of its design and steel produced, and availability of working capital. The investors claim they learned of the mill's problems in October 1998 after most of the mill's management team had been fired. The plaintiffs at that time were told the plant construction was over budget and faced a myriad of problems. (Bangkok Post, Business Day 24-Aug-1999) PANJAPOL PAPER: Gets court order to rehabilitate ------------------------------------------------ The Central Bankruptcy Court yesterday ordered Panjapol Paper Industry, one of the country's leading paper producers, to rehabilitate its business under the Bankruptcy Law, following an earlier rehabilitation order issued to another company of the same group, Panjapol Pulp Industry. According to the court, the request to rehabilitate Panjapol Paper Industry had been made by Thai Farmers Bank (TFB), the company's major creditor. Three of the company's trade creditors previously submitted petitions to oppose the rehabilitation but decided to withdraw them later. The court also appointed Surapong Tejavibulya from Panjapol Paper Industry's law division as the company's rehabilitation planner. Surapong is also the planner for the rehabilitation of Panjapol Pulp Industry, which had entered the rehabilitation process after the court's order in late June. Surapong refused to mention the exact amount of the debts of Panjapol Pulp Industry and Panjapol Paper Industry, but said that the two companies owed billions of baht. After both companies had announced that they were seeking approval for rehabilitation early this year, payment of bank debts had been stopped automatically, but the companies were still servicing debts owed to trade creditors. Apart from TFB, Panjapol's creditor banks are Thai Military Bank, Bangkok Metropolitan Bank, and Siam City Bank. "The banks and the company are working in close collaboration to make the rehabilitation plan feasible. Meanwhile, we have discussions with trade creditors too, from time to time," said Surapong. After the order for rehabilitation, creditors of Panjapol Paper Industry have one month to inform the court about the amount of debt owed by the company. Along with this, the rehabilitation planner have three months to complete a business rehabilitation plan, preparation period of which could be extended twice by one month. Surapong explained that the rehabilitation plan would primarily comprise of the conversion of debt to equity and rescheduling of loan repayment periods. The company has no intention to seek a strategic partner at this stage. One of the leading players in the Thai paper industry, Panjapol owns a packaging paper plant with an annual capacity of 249,000 tonnes. It also produces 48,000 tonnes of printing and writing paper a year. The company was investing in a pulp production facility requiring a total investment of over Bt10 billion, but the project has been postponed. The group's two power projects, with a capacity of 150 megawatts each, are among six power plants under the Small Power Producers (SPP) scheme that are requesting suspension of operations for at least three years, in order to wait for the recovery of the economy. Also, Panjapol group is the developer of the high-rise building on Rama IV road which houses the headquarters of Esso (Thailand). (The Nation 24-Aug-1999) SAMMAKORN PLC: To sell stake in Danacom --------------------------------------- Listed property developer Sammakorn Plc will sell the entire Bt65.60 million stake in its wholly-owned Danacom and Development Co Ltd to Sribathana Co Ltd, another related party, to alleviate its loss burden. Sribathana is a wholly-owned subsidiary of HM's Private Property Office which is also the largest shareholder in Sammakorn with a combined direct and indirect holding of 60.14 per cent. According to a company statement quoting Sammakorn managing director Somsak Kemarangsri, the sale had stemmed from Danacom and Development Co Ltd's continuous posting of hefty losses and having to pay relatively high interest rates sent climbing by the country's economic woes. The losses generated by its subsidiary have adversely affected the company's performance, which is evident from the net loss of Bt12.82 million in the second quarter of this year against the Bt590,000 net profit in the same period a year ago, he said. In fact, the company's sales in the second quarter of this year considerably jumped to Bt102.513 million, compared with Bt68.08 million in the corresponding period last year. Danacom and Development Co Ltd operates the Worachak project, located in Bangkok's Ponprab district. The project, which commenced commercial operations in the first quarter of this year, comprises a three-level shopping area and an eight-storey parking lot. Somsak said the purchaser would pay Bt6.55 million on the day the contract is signed. The purchaser will pay Bt6.55 million each year thereafter in instalments, over an eight-year period from Sept 28, 2000, to the same date in the year 2008. However, to become valid, the deal must receive support exceeding 75 per cent of the total votes of Sammakorn's shareholders, excluding the votes of those related to the transaction. SCB Securities has been assigned the financial adviser for the deal. Sammakorn's share price tumbled to Bt18.50 at the close of trading yesterday, falling by Bt1 from last Friday's close of Bt19.50. (The Nation 24-Aug-1999) THAI FARMERS BANK: Posts first-half loss ---------------------------------------- Thai Farmers Bank yesterday reported audited H1 losses of 17.34 billion baht (14.74 baht per share), compared with losses of 3.9bn (3.96) a year earlier. (Bangkok Post 24- Aug-1999) THAI FILM INDUSTRIES: Ends debt restructure,shares to BBL ---------------------------------------------------------- Thai Film Industries Plc (TFI) said yesterday it will issue 30 million new shares to Bangkok Bank (BBL) to complete its debt restructuring programme. The capital increase announcement followed the debt restructuring agreement that TFI signed with BBL, its main creditor, last Friday. TFI managing director Vallop Kunanukornkul said the deal with BBL marked the completion of debt restructuring talks since the firm had already concluded debt restructuring plans with other smaller creditors. Under the plan, TFI will increase its registered capital to Bt1.02 billion from Bt720 million by issuing 30 million new shares. BBL will be the sole subscriber to the new capital increase shares at Bt10 a piece under the debt-to-equity conversion plan, although the TFI share price is trading at only around Bt4 on the local bourse. BBL has agreed to subscribe to the TFI shares at the price higher than the market price because it has confidence in the future of the company, said Vallop. But he declined to disclose details on the amounts of debts TFI owed to BBL. An extraordinary shareholders meeting will be held on 17 Sept to approve the IFI's recapitalisation plan. BBL is scheduled to 'pay' for the new shares on Sept 20. According to TFI report submitted to the Stock Exchange of Thailand (SET), the company has appointed Deloitte Touche Tohmatsu as financial adviser to help it explain to stockholders merits of the capital increase and debt restructuring plans. Following the debt-to-equity conversion, BBL will hold a 29.4 per cent stake in TFI while the Prayudh Mahakijsiri group will reduce its shares to about 50 per cent from slightly over 70 per cent at present. Vallop said the debt restructuring agreements contains some 'haircut' or debt reduction but he declined to elaborate on the details. According to a report TFI filed to SET earlier, the company said as of 30 June 1999, it had US$82 million in debts with creditor banks plus US$12.3 million in unpaid interest, in addition to debts totalling US$32 million it owed to trade creditors and US$39 million worth of trade receipts. "Our problems stemmed from the depreciation of the baht and the high interest rate which only began to decline in the third quarter of last year," he said. In addition, TFI, a BOPP film producer, has appointed Deloitte Touche Tohmatsu Corporate Restructuring as its financial advisor to give an opinion to shareholders. TFI earlier decided to close down its subsidiary in Bangladesh after facing world economic turbulence, resulting in mounting debts now worth 75 million baht recorded in the company's statement in the second quarter of this year. Observers said TFI's problems also involved its diversification into the property business which started to go downhill well before the mid-98 currency devaluation. The company developed the 'Riverside Privacy', a 32 floor- luxury condominium, with a project cost of Bt1.65 billion. TFI is a manufacturer of thin-film for the packaging industry including Bopp, polyester, and CPP. According to Vallop, TFI is ranked among the six largest producers in the world of such products. TFI reported a net loss of Bt141.8 million in the second quarter, down from Bt527.9 million in loss for the same period last year. But for the first half, the company reported a net loss of Bt425.8 million, compared to Bt467.7 million in profit a year earlier. It had an unrealised foreign exchange loss of Bt1.33 billion as of the end of June 99. TFI's sale revenues also shrank Bt394 million or 27 per cent during the first half because of the appreciation of the local currency and the lower product prices. The company exports about 80 per cent of its total production. Apart from TFI, Prayudh is also involved in stainless steel, coffee, and copper manufacturing operations. The copper business is negotiating a debt restructuring plan to complete construction of manufacturing facility. (The Nation, Business Day 24-Aug-1999) THAI OIL CO.: Cabinet to thrash out details of debt plan -------------------------------------------------------- After weeks postponement, the Cabinet will today consider a US$2.1 billion debt restructuring plan for Thai Oil Co which includes a plan for state-owned Petroleum Authority of Thailand (PTT) to inject US$391 million to assist the refinery. Industry Minister Suwat Liptapanlop confirmed that he would submit the debt restructuring proposal for Thaioil to the cabinet today. According to a cabinet document, PTT would use its retained earnings and new borrowings of US$300 million to fund the assistance programme for Thaioil. PTT would consult the Ministry of Finance on the additional borrowing which could be the issuance of bonds or bank loans, either from domestic or off-shore sources. After the cabinet's approval, Suwat said he may accompany PTT executives to negotiate the debt restructuring plan with creditors in Japan. Japanese banks account to about 40 per cent of the total debts. PTT, and Thaioil advisers met Thai and Japanese financial institutions during April to June this year and it appeared that financial institutions were ready to cooperate on the plan. However, the Japanese banks regarded Thaioil as a national refinery and would like the government to take responsibility on the full amount of the debts. "However, there were several Japanese banks which were ready to cooperate," according to the cabinet document proposed by the industry ministry. PTT has insisted it would limit its stake in Thaioil to not more than 49.9 per cent. Under the debt restructuring plan, PTT would inject US$350 million of new funds into Thaioil, a move which would increase its stake in Thaioil to 49.9 per cent from 49 per cent at present. Creditors would be asked to participate in the recapitalisation by converting US$350 million loans they extended to Thaioil to a combined 49.9 per cent holding in the refinery. PTT would contribute another US$41 million to help Thaioil's subsidiary Thai Paraxylene Co restart the construction of its US$230 million petrochemical project. Creditors would also have to extend the repayment period for the remaining debts of Thaioil to up to 15 years in addition to reducing the interest charges to come in line with the projected cash flow of the refinery. Creditors who would not agree to the debt rescheduling and interest reduction, would be offered a debt buyback programme for Thaioil to buy the debts at discount. At present, Thaioil has a registered capital of Bt20 million, a very low amount if compared to its total debts of Bt83 billion. It has to announce progress in debt restructuring arrangements since November last year. Thaioil has more than 120 creditors. (The Nation 24-Aug- 1999) TOTAL ACCESS COMMOS.: Nears deal with Bell Canada ------------------------------------------------- Ailing Total Access Communication plc (TAC), a Singapore- listed mobile phone operator, is expected to wrap up negotiations with Bell Canada on an acquisition deal after talks failed with several interested foreign telecom firms during the past two years. TAC has been pressured by its creditors to firm up a new partnership deal as soon as possible after it has failed on a commitment so far to find a strategic partner within an 18-month period. This time-frame was part of a US$537- million debt restructuring agreement signed last July. While seeking a partner, TAC also tried another option to reduce its debts by offering a total of 50 million shares in foreign markets. However, it could sell only 26.4 million shares, worth $68 million, at $2.60 per share, from the total 50 million share offered. The telecom industry source confirmed that Bell Canada is the latest investor participating in partnership negotiations in the middle of this year, while Norway's Telenor, which earlier withdrew from the deal, also returned to the negotiations. Bell Canada is a telecom firm which provides a full range of communication services to more than seven million residential and business customers in Canada including local and long distance telephone services offered through wired lines, and wireless and Internet access. The company reported revenues of $8.3 billion in 1998. TAC hinted that the progress of the partnership deal last week when it informed its investors that the company will make an announcement soon. TAC said that the new strategic partner will hold a 20 to 25 per cent share in the company. This will be done by placing new shares with its new partner, including part of a 65 per cent share from TAC's major shareholder, United Communication Industry Plc (Ucom). According to the conditions, the new partner will have to purchase additional shares in Ucom as well. Thirty-six per cent of Ucom is owned by Somers Ltd and 26 per cent belongs to the Bencharongkul Family. According to the deal's requirements, the new partner is expected to pay on average $400 million for the shares. However, the telecom analyst believed that the deal was likely to be aborted like many attempts of TAC in the past, due to internal conflict among TAC's major shareholders and within the management ranks of the company itself. The analyst suggested that the failure was because TAC's top management had no will to allow partners to control the company's management or had failed to settle the share price with its partners. While a source from TAC said that the conclusion of a deal was possible this time around, because unlike before TAC's major shareholders had stepped in to control the negotiation process. Earlier TAC also had talks with three foreign telecom firms, including Telenor in a bid to find a strategic partner. Motorola was the first company to join talks to form an alliance with TAC, but later withdrew because of its own operational restructuring. Telenor also pulled out to concentrate on its merger with Tellia, a Swedish telecom carrier. TAC subsequently failed to tie-up with SingTel, which later struck a long-term business relationship with the largest mobile phone operator Advanced Info Service Plc (AIS). If TAC succeeds in securing a new partner, in the next step it will have to refinance another mountain of debt in the form of bonds, worth $650 million, of which $100 million will mature in the year 2001 and the remainder in 2006. (The Nation 24-Aug-1999) 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. 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