/raid1/www/Hosts/bankrupt/TCRAP_Public/990915.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, September 15, 1999, Vol. 2, No. 179
Headlines
* C H I N A & H O N G K O N G *
CHIMNEY ALLIANCE GROUP: Posts first-half loss
FAW-DAEWOO AUTOMOTIVE ENGINE: Victim of Daewoo finan.crisis
GUANGDONG BUILDING INDUSTRIES: Posts first-half loss
LUOYANG GLASS: To sell subsidiary to avoid share suspension
SINGER CO.: Files for bankruptcy protection in U.S.
THEME INT'L HOLDINGS: Giordano takeover to meet opposition
* I N D O N E S I A *
PT BAKRIE FINANCE: Court rejects bankruptcy claim
* J A P A N *
TOSHIBA CORP.: Projects another year of being in red
* K O R E A *
DAEWOO GROUP: Fresh funds for trading arm
DAEWOO GROUP: Gov't mulls stepping in to help
KOREA FIRST BANK: Sale to Newbridge `near collapse' again
KOREA LIFE: Non-viability declared, gov't funds to follow
* P H I L I P P I N E S *
BELLE CORP.: No peace accord as yet
MONDRAGON LEISURE AND RESORT: Pagcor holds back money boost
* S I N G A P O R E *
MAYFRAN INT'L: Posts annual loss
* T H A I L A N D *
PHYATHAI III HOSPITAL: Stock to be repossessed
THAI MILITARY BANK: Presents back-up recapitalization plan
THAI OIL: PTT submits restructure plan
==============================
C H I N A & H O N G K O N G
==============================
CHIMNEY ALLIANCE GROUP: Posts first-half loss
---------------------------------------------
Chinney Alliance Group said unaudited interim net loss more
than doubled to $209.3M from $94M incurred by writing off
$236.5M from the disposal of its carpark operation.
Turnover fell 40% to $482.3M for the six month to June 30
primarily due to the disposal of Dharmala Philippines last
December and Adams Parking (International) in April this
year, according to a statement.
For the period under review, the company made an
exceptional loss of $10M from diminution in value of
investment in Dharmala Agrifood Asia. Sale of discontinued
operations has led to an exceptional loss of $187.9M,
according to a statement. And despite improvement in its
trading operations, high interest expenses on corporate
debts and considerable professional fees incurred by the
disposal of operations have led to an operating loss before
exceptional items of $10.9M on its continuing operations,
the statement said.
FAW-DAEWOO AUTOMOTIVE ENGINE: Victim of Daewoo finan.crisis
-----------------------------------------------------------
One of the biggest South Korean investments in the
mainland, a state-of-the-art plant to make car engines,
lies almost idle, a victim of the financial crisis of its
majority shareholder, Daewoo Motors. Daewoo holds 50 per
cent of the 5.69 billion yuan (about HK$5.3 billion)
investment in FAW-Daewoo Automotive Engine, a joint venture
with two mainland companies, the First Automobile Works of
Changchun, which holds 25.5 per cent and Shandong Auto
Industry Corp, with 24.5 per cent.
Work began on the plant, on a site of 456,000 square metres
in the economy and technology zone of Yantai, in April
1997. It has an annual output capacity of 300,000 engines
but production this year will be about 30,000.
"We are working one hour a day," said Zhao Yugao, general
manager of its management and planning department. "We
could be working 20 hours a day. The equipment here is the
best in China, fully automatic and of world quality."
The problem is that, under the terms of the joint-venture
agreement, the plant must export 100 per cent of its output
to Daewoo in Korea. But, in the midst of restructuring and
burdened by a mountain of debt, Daewoo is unable to
purchase anything close to its original amount.
"It will be very hard to change the terms of the original
agreement and sell to Chinese factories," Mr Zhao said.
"This was an agreement approved by the State Council. There
is over-production of passenger-car engines in China, with
capacity about 2.5 times that of demand of 600,000 a year.
Daewoo would not allow us to sell to Hyundai, the other
South Korean maker, and it would take a year to re-tool the
plant to fit the model of another manufacturer," he said.
"We will lose money this year. Next year, if we could sell
70,000-80,000 engines, that would be close to breaking
even. So it is the responsibility of Daewoo to buy more.
The company has many problems. For the time being, things
will be difficult," he said.
He ruled out the possibility of Daewoo selling its share in
the plant because it had selected cars as its core
business. In the future, it wants to build a factory in the
mainland making cars, which would be supplied by the engine
plant, for sale to the domestic market.
"At the moment, this would not be approved," Mr Zhao said.
"As for the future, it will depend on the situation at that
time."
Daewoo chose the site because Yantai is a port city on the
north coast of Shandong one night by sea or one hour by air
from Seoul. Labour costs are a fraction of what they are at
home and they were offered attractive terms for land and
other costs. Mr Zhao said that First Auto Works, one of
the mainland's biggest car-makers, could purchase the
engines but would first have to design a car to put them
in. (South China Morning Post 13-Sep-1999)
GUANGDONG BUILDING INDUSTRIES: Posts first-half loss
----------------------------------------------------
Guangdong Building Industries has reported a dismal interim
result under the heavy weight of a tough operating
environment, ensuing credit squeeze and negative sentiment
amid its debt restructuring process. The construction
company, about 57 per cent owned by Guangdong Investment,
sank into the red with a $148.49 million attributable loss
in the six months to June, against a $14.07 million
attributable profit a year earlier.
Performance was affected by a $109.1 million exceptional
loss mainly due to provisions for contract work in progress
and doubtful debts. The company incurred an operating loss
of $39.91 million, compared with an operating profit of
$16.37 million a year ago. Turnover fell to $94.67 million
in the period under review from $314.55 million last year.
Basic loss per share stood at 176.32 cents, against
earnings per share of 16.72 cents previously. No interim
dividend was proposed. The company had a net deficit of
$76.30 million as of June 30, compared with $196.88 million
in net assets previously. It had a negative cash and cash
equivalents of $8.56 million, compared with positive cash
and cash equivalents of $6.05 million a year earlier. The
company said it expected a loss for the full year but said
business would return to normal following the
implementation of a restructuring proposal. (South China
Morning Post 13-Sep-1999)
LUOYANG GLASS: To sell subsidiary to avoid share suspension
-----------------------------------------------------------
Luoyang Glass will sell an ailing subsidiary to its parent
to avoid having its A shares suspended on the Shanghai
Stock Exchange after two consecutive years of losses,
according to a company official.
Under stock exchange rules, companies posting losses two
years in a row are given "special treatment" and their
share prices are subject to a daily trading limit up or
down 5 per cent, instead of 10 per cent. Those with three
consecutive yearly losses will have their shares suspended
from trading.
Luoyang Glass, a leading mainland maker of float glass,
also has H shares traded in Hong Kong. Company secretary
Wang Jie said yesterday it was selling its 55 per cent
stake in Sino-foreign Qingdao Taiyang Glass Industry, which
makes 500 tonnes of float sheet glass daily. State-owned
China Luoyang Float Glass Group, which owns 57.14 per cent
of Luoyang Glass, will take up the stake and assume
receivables of 77.7 million yuan (about HK$72.5 million).
The consideration for the deal is 10,000 yuan in cash.
Qingdao Taiyang, which lost a net 125.17 million yuan in
1997 and 110.74 million yuan in 1998, contributed largely
to the misfortunes of Luoyang Glass over the past two
years, Mr Wang said. Luoyang Glass bled 223.44 million
yuan in 1997 and 363.36 million yuan last year. In the
first half of this year, it lost 18.73 million yuan.
Mr Wang said following the sale, the company could swing
back to profit for full-year 1999, bolstered by hefty
write-backs of 77.7 million yuan in provisions advanced to
other joint-venture partners. Also reflected in this
year's accounts would be a write-back of 26.35 million yuan
arising from Qingdao Taiyang's losses previously taken up
by the company in excess of its captial contribution.
Luoyang Glass said the move - subject to independent
shareholders' approval - would cut losses and improve its
finances. Luoyang Glass will be the latest debt-ridden H-
share company to turn its fortunes around with help from
its parent. Nanjing Panda Electronics earlier this year
announced it was selling inventory and receivables to its
parent. (South China Morning Post 14-Sep-1999)
SINGER CO.: Files for bankruptcy protection in U.S.
---------------------------------------------------
Singer Co. NV, which is based in Hong Kong and no longer
makes sewing machines in the United States, blamed a
decline in the international sewing market and says it ran
short of cash in the wake of its 1997 purchase of Pfaff of
Germany, is seeking bankruptcy protection under Chapter 11.
Snags in the overseas market has forced the world's
largest maker of sewing machines into seeking bankruptcy
protection. Singer's retail and production businesses will
continue operating without interruption while it develops a
reorganization plan. The Chapter 11 filing, made Sunday
night, includes Singer's parent company, most of its
U.S. subsidiaries and the holding companies for Singer's
foreign businesses.
Singer president and chief executive Stephen H. Goodman
cited the global financial turmoil that has ravaged
emerging markets over the past two years. As a result, he
said an expansion in countries such as Brazil, China and
Vietnam was "largely unsuccessful."
Singer is the world's leading manufacturer and distributor
of consumer sewing machines. It has 1,500 retail outlets,
all overseas, and 58,000 independent dealers. The company
has 18,000 employees in 150 countries, and also makes
consumer electronic equipment, furniture and home
appliances. Singer lost $207 million in 1998 on sales of
$1.26 billion, figures which exclude the Germany sewing
manufacturer Pfaff AG, which Singer acquired last year.
Singer said it has reached an agreement with an
unidentified major lender for financing during the
company's restructuring. It will be filed with the
court this week for interim approval.
The company is controlled by Hong Kong businessman James
Ting. Semi-Tech Corp, the Toronto-listed company that owns
49.6 per cent of Singer and raised about US$1 billion
(HK$7.8 billion) in the early 1990s, asked for bankruptcy
protection last week, saying it could not afford to buy
back $550 million in bonds.
The 148-year-old company said its request for protection
reflected its need to support Pfaff amid a declining market
for industrial sewing machines and a $50 million deposit it
made on Russian property, most of which it has yet to
recover. Singer, which lost $45.3 million during the first
half, said it reached an agreement with an unidentified
"major lender" to fund its business during the
restructuring and expects to ask for approval of a funding
plan this week.
Its auditors, Deloitte & Touche, still have not signed off
on its results for 1998, when it lost $207.3 million.
Singer's president and chief executive Stephen Goodman
said: "The filing will enable the company to refocus on its
successful core business as a retailer of consumer durables
in selected markets in Asia, southern Europe, Mexico and
the Caribbean."
It was all a far cry from the vision Mr Ting presented in a
December 1997 interview, shortly after saying Singer would
lay off 6,000 people, about 28 per cent of its workforce.
"Singer is profitable now, and the changes mean it should
continue to be profitable," the 49-year-old Mr Ting said at
the time. "It just doesn't make any sense to go on making a
low-end product in high-cost countries."
Mr Ting is a Shanghai-born, Canadian-educated entrepreneur
who started out in business with $3,000 and at one point
was worth about $2 billion. Shares in Akai Holdings,
formerly Semi-Tech (Global), which controls two Japanese
electronics companies, fell 5 per cent to 28.5 HK cents
yesterday.
Singer's application comes a few days after its parent
company, Semi-Tech Corp, filed for Chapter 11 bankruptcy
protection to prevent its creditors from forcing it to buy
back about $550 million in bonds, which are worth about 86
per cent less than when they were first issued in 1993.
Semi-Tech Corp owns 49.6 per cent of Singer, which was
controlled by James Henry Ting - the chairman of Akai
Holdings. The company was also the former single largest
shareholder in Akai Holdings.
Audio-visual goods maker Akai announced yesterday that
Semi-Tech had disposed of the rest of its 33.249 million
shares interest in Akai on September 8. An Akai spokesman
said Semi-Tech no longer had any interest in Akai and thus
Akai had no connection with Singer.
According to the stock exchange's records, Mr Ting and
Semi-Tech have been selling stock in Akai in the past few
months. He has significantly reduced his holdings in Akai
in a series of sell-offs that came not long after the
company issued new shares to strategic investors - Fortune
Grace - on June 28. He has sold 445.53 million shares in
Akai for $141.2 million since July. (AP, NewsHound;
Bloomberg, Hong Kong Standard; South China Morning Post
14-Sep-1999)
THEME INT'L HOLDINGS: Giordano takeover to meet opposition
----------------------------------------------------------
Giordano's heavily discounted takeover offer for Theme
International Holdings is expected to meet strong
opposition.
Creditors were concerned that, under Giordano's takeover
plan, they would receive only 12 per cent of outstanding
loans, they said. The troubled fashion retailer last night
said it had received Giordano's preliminary takeover
proposal yesterday and it had asked the stock exchange to
suspend its shares.
Under the proposal, Theme would place 64 million new shares
to Giordano and $30 million in convertible notes. Giordano
would take up to 50.5 per cent of Theme by paying an
effective issue price of 2.5 cents, representing a 91.4 per
cent discount to Theme's closing price of 29 cents on
Friday. Giordano also would inject $93.5 million into
Theme, out of which $25.6 million would be used to repay 12
per cent of Theme's debts.
However, Giordano also asked Theme's 13 bank creditors, led
by HSBC, to accept an 88 per cent reduction on debt of
$242.78 million. Theme says it is in preliminary talks
with two other parties.
"There is a chance the [Giordano] acquisition plan may not
go through, as banks are being asked to take an 88 per cent
haircut," ING Barings investment analyst David Li said.
Analysts also said the takeover plan would cast short-term
pressure on Giordano's earnings and share price, as Theme
was expecting to post a loss of $70 million to $100 million
this year. In the year to March 31, the fashion retailer
had an attributable loss of $218.13 million, down from
$806.62 million in the previous period.
Giordano's share price shed 0.76 per cent yesterday to
close at $6.50. Analysts said it could benefit in the long
run if it could turn around Theme. (South China Morning
Post 14-Sep-1999)
=================
I N D O N E S I A
=================
PT BAKRIE FINANCE: Court rejects bankruptcy claim
-------------------------------------------------
The Jakarta Court rejected on Thursday the bankruptcy claim
jointly filed by five Hong Kong-based creditors against
listed finance company
PT Bakrie Finance Corp (BFC) on lack of evidence.
The plaintiff's lawyer Joni Aries Bangun of Hanafiah
Ponggawa Adnan Bangun Kelana law firm said that the
presiding judge did not see that there was a matured debt
that Bakrie Finance was liable to.
Five Hong Kong-based banks jointly filed a bankruptcy suit
in August against BFC, claiming that the company had failed
to pay a total of $ US21 million in bank loans.
The five banks include AB Capital Markets Ltd., Cho Hung
Leasing & Finance Ltd., Hana Bank, Hanmi Leasing & Finance
Ltd. and KEB and Finance Ltd. (Asia Pulse 10-Sep-1999)
=========
J A P A N
=========
TOSHIBA CORP.: Projects another year of being in red
----------------------------------------------------
Toshiba Corp, the world's largest maker of notebook
computers, said a stronger yen and slowing microchip sales
will keep it in the red for a second year.
The company said it expects to lose 15 billion yen (S$235
million) in the year through March, reversing a 25 billion
yen profit forecast made in May. Toshiba lost 15.5 billion
yen last year, its first consolidated loss in 23 years.
The revision was not unexpected.
Two Toshiba analysts lowered their earnings forecasts for
the company last week. Toshiba shares, down 7.8 per cent
this month, rose as much as 32 yen, or 3.7 per cent, to 908
yen yesterday. Daiwa Securities Co analyst Mami Indo
reversed her forecast to a group net loss of 3 billion yen
in the year through March, from an earlier prediction of a
12 billion yen profit. Fumiaki Sato, an analyst at Deutsche
Securities, cut his target to a profit of 13 billion yen
from 28 billion yen.
The semiconductor division of Toshiba, Japan's No 2
chipmaker, lost 50 billion yen last year as global
semiconductor demand waned and prices tumbled. Though the
price of the industry standard synchronous 64-megabit
dynamic random-access memory chip has surged recently,
chipmakers were forced to sell them at a loss after the
price fell to an all-time low of US$4.55 on July 1.
"Because DRAM prices declined, operating losses were 30
billion yen in the first half of the year" or about 11 per
cent worse than the same time a year earlier, said Mr Sato,
who rates Toshiba "market perform".
Adding to Toshiba's troubles is the strong yen, which has
hurt profits in the company's personal computer division.
Eighty per cent of Toshiba's personal computers are
exported, primarily to North America but also to Europe.
The yen's rise against the dollar makes it harder for
export-driven Toshiba to match competitors' price cuts
overseas and reduces the amount of yen it is able to
repatriate from its dollar-denominated earnings in the US.
Ms Indo, who holds an "average" rating on Toshiba, expects
the company to reach its sales target, though she lowered
her estimate of operating profit to 70 billion yen from 90
billion yen and pretax profit from operations to zero from
20 billion yen.
"LSI (large scale integrated circuit) shipments have
increased but profitability hasn't, meaning losses will
rise," Ms Indo said.
Toshiba is also feeling the pinch of shortages in parts for
its personal computer division. Tesuya Mizoguchi, a Toshiba
senior vice-president, on Aug 13 said personal computer
shipments abroad will grow 10 per cent in the year to
March, down from an earlier estimate of 22 per cent growth
to 2.8 million machines.
A shortage of liquid crystal display panels for notebook
computers means the company will be unable to meet demand
for the devices this year, Mr Mizoguchi said. Toshiba had
said it wanted to ship 3.5 million PCs in the year, 21 per
cent more than the 2.9 million it shipped in the year ended
March 31. Toshiba relied on profit from its notebook PCs
to cancel out heavy losses on microchips and consumer
electronics in the year ended in March. (Bloomberg,
Business Times 14-Sep-1999)
=========
K O R E A
=========
DAEWOO GROUP: Fresh funds for trading arm
-----------------------------------------
Major creditors of Daewoo Corp., including Korea First Bank
(KFB), called a meeting Monday in which they decided to
immediately release W190 billion in new funding to the
trading arm of the Daewoo group.
The loan will go towards purchasing finished products from
suppliers to be shipped overseas and settling commercial
bills, unclogging a funding blockage at the Daewoo unit
with the heaviest debt load. KFB has also decided to
provide W82 billion to Daewoo Telecom, allowing it to
resume issuing letters of credit.
The same day, the corporate restructuring committee of the
Financial Supervisory Commission (FSC) announced that it
had met with major creditors of Daewoo, including six large
banks and three investment trust firms. According to the
committee, the two parties agreed that the banks would
establish a joint consultation body to settle any
differences arising among all creditors during the process
of debt workouts at Daewoo subsidiaries. (Digital
ChosunIlbo 13-Sep-1999)
DAEWOO GROUP: Gov't mulls stepping in to help
---------------------------------------------
The Financial Supervisory Commission (FSC) is considering
injecting government funds into Korea Guarantee Insurance
Co. (KGIC) in a bid to resolve the issue of interest
payments on corporate bonds issued by Daewoo subsidiaries
guaranteed by KGIC.
Bondholders are likely to continue feeling insecure,
however, as they will not be able to collect on interest
any time soon. One high-ranking FSC official said neither
Daewoo subsidiaries nor KGIC are able to cover interest
payments on the bonds, making it necessary for the
government to step in and provide public funds in order to
prevent panic among investors.
Observers say that it is unprecedented for a high-ranking
government official to have made remarks on the channeling
of government funds to a specific financial institution.
Another FSC official said that if a direct injection of
funds into KGIC is not possible, the government will set up
a Bad Fund to absorb KGIC's bad assets. The total amount of
Daewoo bonds guaranteed by KGIC comes to W9.46 trillion,
with a total of W70 billion in interest payment requests
filed at KGIC to date. (Digital ChosunIlbo 14-Sep-1999)
KOREA FIRST BANK: Sale to Newbridge `near collapse' again
---------------------------------------------------------
The sale of Korea First Bank (KFB) to Newbridge Capital of
the United States is facing "near collapse."
Despite rumors and speculation in financial circles that
the successful sale of KFB to the U.S. investor is
imminent, a foreign source deeply involved in the
negotiation process told The Korea Times exclusively
yesterday that the deal is, on the contrary, about to be
"terminated."
He said on condition of anonymity that the Newbridge team
is considering informing the Financial Supervisory
Commission that the demands put forward by the government
Monday evening were impossible to accept. He said it will
mean an end to the first ever sale of a domestic commercial
bank to a U.S. investor.
This will mark another failure of a bank sale to an
international investor, which is expected to slow down the
process of Korea's financial restructuring. Earlier, the
government and Hongkong and Shanghai Banking Corporation
(HSBC) of Britain decided to call off the sale of Seoul
Bank, ending the six-month long negotiation process.
The foreign source added that Newbridge no longer wishes to
continue dialogue with its Korean counterpart as there is
no proper understanding between the two sides.
"The negotiations will not go on under the present
circumstances. The two sides still do not understand each
other," he said.
According to the source, the FSC and Newbridge had agreed
to sign the final takeover contract either Tuesday or
Wednesday of this week until the Korean officials came up
with yet another major issue.
"The FSC and Newbridge came to a mutual understanding that
they would complete the takeover process before Wednesday
of this week, after reaching agreement on most of the terms
and conditions. However, the FSC came up with numerous new
issues Monday evening which were unacceptable to the U.S.
side," he said. "Everyone is confused at the intentions of
the FSC. We have no idea what Korea's financial authority
really wants."
In late 1997, the government signed an agreement with the
International Monetary Fund to turn the KFB over to a
foreign financial concern in a bid to bring in
"international best practices." Newbridge, an American
private equity investor, won the right to take over the KFB
in competition with other major banking concerns, including
HSBC, on New Year's Eve last year.
The two sides have been discussing the terms and conditions
for the bank sale for the last nine months after signing a
memorandum of understanding. But negotiations between the
FSC and the U.S. investor resulted in a failure to meet
deadlines due to differences over KFB's asset value and
terms for sharing future losses arising from the bank's
loans.
The government now holds 100 percent of the shares of the
KFB, which currently operates 339 branches across the
nation, four overseas offices, and two international joint
venture firms. The KFB currently has 4,829 employees, down
from over 8,000 before the financial crisis. It has 4.5
trillion won in paid-in capital. (Korea Times 14-Sep-1999)
KOREA LIFE: Non-viability declared, gov't funds to follow
---------------------------------------------------------
After reaching a final decision at a senior members'
meeting, the Financial Supervisory Commission yesterday
designated Korea Life Insurance "non-viable," instructing
Korea Deposit Insurance Corp. (KDIC) inject public funds
immediately.
After scrapping the existing shares of Korea Life, the
nation's third largest insurance firm, the KDIC will put 50
billion won into the firm as an initial part of the
nationalization process. The 50 billion won rescue fund
from the deposit insurance corp. will be used for issuing
new shares of Korea Life. The total recovery cost of Korea
Life estimated by the FSC came to 2-3 trillon won.
The financial regulatory authority added that it will
assign a new supervisor to take control of the government-
led recovery process in accordance with the law, should the
present management fail to comply with the FSC order again.
The announcement came after the FSC had declared Korea
Life's self-recovery plan "inadequate."
The financial authority, last week, decided to give the
incumbent board members of Korea Life seven days to come up
with a comprehensive self-recovery package for the ailing
insurer. In response to the government's call, Korea Life
said the seven-day period was too short for preparing any
recovery plan.
It is now expected that Korea Life will file another legal
action shortly, against the final call of the financial
regulatory authority. Despite a court ruling forbidding
the move, the FSC said it was committed to complete the
government-led restructuring of the ailing life insurance
company within September.
The Seoul Administrative Court ruled last Tuesday the FSC's
bid to scrap existing shares of the firm was "illegal,"
handing a surprise victory to the present owner of Korea
Life. The court ruled that the incumbent executives would
retain their management authority, rejecting the FSC's
appointment of a new supervisor in charge of Korea Life's
forced restructuring process.
The court ruling, in favor of the jailed Korea Life
chairman Choi Soon-young, dealt a major blow to the FSC's
attempt to nationalize the private life insurance company
without taking proper administrative procedures.
Should the insurance company refuse to follow the order,
the commission will appoint a manager, in accordance with
the law on financial restructuring, to reduce the capital.
Subsequently, public funds will be injected. "The whole
process will be completed within the month," the official
said.
"As planned, we will inject public funds to normalize the
ailing insurer," a commission official said.
The commission said that, since it has addressed procedural
problems as highlighted by an administrative court, it will
be able to have its orders implemented this time. It was
forced to cancel its previous insolvency designation of
Korea Life because of a court verdict to the effect that
the commission should have given Choi the opportunity to
express his views.
Meanwhile, officials at Korea Life are demanding Choi stop
the legal battle, urging the government to inject public
funds quickly to normalize the embattled company. (Korea
Times, Korea Herald 14-Sep-1999)
=====================
P H I L I P P I N E S
=====================
BELLE CORP.: No peace accord as yet
-----------------------------------
It looks like shareholders of Belle Corp.(Belle) are still
locked in a waiting game over a possible peace accord as
the group led by ousted director Robert Ongpin is said to
be biding time to hand in the cash.
Sources privy to the talks told BusinessWorld that Mr.
Ongpin met with the group led by stockbroker Wilson Sy over
the weekend to ask for an extension to September 20. The
deadline for Mr. Ongpin to pay four billion Philippine
pesos (PhP) (US$100 million at PhP39.828:US$1) to buy out
the 800 million shares held by the Sy group at PhP5 per
share expired yesterday. Mr. Ongpin was said to have
finished conducting the due diligence on Belle's financial
books and have found these to his satisfaction.
However, an "unidentified principal" reportedly questioned
the recent drop in the prices of Belle at the stock market
which would make the Ongpin group appear to buy the shares
at a hefty premium over its prevailing market price. The
"principal" was said to be withholding the cash. At the
close of stock market trading yesterday, shares of BEL
(stock symbol for Belle) closed at PhP3.10. Last week, the
price of the company declined by as much as 11.6%.
The Ongpin group was said to be questioning the huge
selling activity on Belle by Wealth Securities, Inc., the
brokerage firm owned by Mr. Sy. Last week, local brokers
I.B. Gimenez Securities, Inc. and Wealth Securities, Inc.
were the heaviest sellers on Belle. Selling activity for
I.B. Gimenez amounted to PhP20.8 million (US$522,000) last
week. Wealth Securities meanwhile sold PhP20.4-million
(US$512,000) worth of shares during the same period
compared with buying worth PhP9.96 million (US$250,000).
Should Mr. Ongpin fail to deliver the said amount, sources
said the tables will be turned, prompting the Ocier-Sy camp
to buy out the Ongpins at PhP4.40 per share, sources
earlier said. This buying price was Belle's previous high
at the time when news of its agreement with the state
gaming regulator Philippine Gaming and Amusement Corp.
(Pagcor) was announced three months ago. Mr. Sy and his
co-shareholders were said to have registered 800 million
shares under the trust of Equitable Bank Corp. to show that
they were serious about the deal.
Sources said if the money is not delivered, the deal would
be dissolved. BusinessWorld earlier reported that the
slated signing of a settlement between the two camps was
deferred for yesterday until the Ongpin group comes up with
the cash. Under the agreement, Ongpin group will buy out
the shares held by Mr. Sy and Belle director Hans T.Sy, son
of mall tycoon Henry Sy, Sr., for PhP4 billion.
The shares held by the Sy group -- which amount to 800
million shares or nearly 27% of company's three billion
outstanding stock -- will be sold to the Ongpin camp at P5
apiece. The Ongpin group reportedly control 20% of Belle.
Officials close to the Ongpin group were unavailable for
comment.
Belle, in an earlier statement, said it could not comment
on the reports that a settlement among the two disputing
camps would be completed.
"Please note that the reported matter involves shareholders
of Belle. Belle itself is not named as a party to the
agreement, and is therefore not in a position to confirm
the same," A. Bayani K. Tan, corporate secretary of Belle
wrote in a statement to the Philippine Stock Exchange
yesterday.
It was agreed among both camps that stockbrokers Benito Tan
Guat and his son Willy G. Ocier will keep their seats in
the board as they were said to be long-time associates.
Among those said to exit with Messrs. Sy are incumbent
Belle president Gregorio T.Yu, and corporate lawyers who
were nominated to the board, namely Edmundo L. Tan of Tan,
Acut and Madrid Law Offices, and Ma. Louisa M. Gonzales and
A. Bayani K. Tan.
"They're leaving not because they need the money. But PhP5
is a good price," a source privy to the talks said.
The Ongpin Group, however, was said to be short of funds
having only half or PhP3.75 billion (US$94 million) at
hand. Mr. Ongpin is said to have gone to Hong Kong
enlisting the support of a white knight. Reports pointed
to Hong Kong- based investment fund Templeton Emerging
Markets fund and businessman Li Ka Shing as the white
knights although these were unconfirmed as of press time.
State gaming regulator Pagcor agreed with Belle Jai-alai
Corp. and Filipinas Gaming and Entertainment Totalizator
Corp. (Filgame) to run jai alai games all over the
Philippines.
Under the agreement, Pagcor will be in charge of managing,
operating and controlling the jai alai operations while
Belle will provide the financing. Filgame, on the other
hand, has agreed to allow the use of jai alai fronton
facilities in Manila. A source close to the Ongpin camp
meanwhile said his close associate former Belle chairman
and AIA Capital managing director Jaime C.Gonzales flew to
abroad "negotiating for the deal". As of presstime, Mr.
Gonzales is still said to be abroad.
Mr. Gonzales is expected to gain back his seat with Mr.
Ongpin in Belle's 15-man board. Shares held by the Ongpin
group were reportedly equivalent to three board seats.
Earnings of Belle posted a loss of P47 million during the
second quarter compared with earnings of PhP246.7 million
(US$6.2 million) last year. (Business World 14-Sep-1999)
MONDRAGON LEISURE AND RESORT: Pagcor holds back money boost
-----------------------------------------------------------
State-run Philippine Amusement and Gaming Corp. (Pagcor)
refused to give struggling Mondragon Leisure and Resorts
Corp. (MLRC) its much-needed financial boost as it
continues to bar requests to reopen its moneymaking Mimosa
Regency Casino.
In a manifestation submitted to the Court yesterday, Pagcor
even castigated MLRC for its tendency to violate contracts,
including the compromise agreement with the Clark
Development Corp. (CDC).
Due to such "proclivity," the government agency said MLRC
should not be given the opportunity to further violate its
"regulatory powers" over the world-class gambling center.
Pagcor, through Government Corporate Counsel Jun N.
Valerio, reiterated its request to the Supreme Court to
order the permanent closure of Mimosa. It said the High
Tribunal should uphold its revocation of Mimosa's license
to operate.
In its motion, Pagcor also asked the Supreme Court to
resolve the case apart from the pending suit on the
rescission of the compromise agreement between CDC and
MLRC.
"Although petitioner Pacgor was a beneficiary in the
compromise agreement when MLRC obligated itself to pay
Pagcor, still Pagcor is not a party to the compromise
agreement. The same is just an admission of MLRC's
violation of Pagcor's grant of authority, the revocation of
which is the subject of the present petition," said the
gaming corporation.
The casino reopening is one of the conditions potential
MLRC investors had set before pouring money into the debt-
saddled firm. As early as January, the government body
already asked for the Court's approval of the franchise
cancellation. Pagcor said the Supreme Court should allow it
to protect its interests and stop MLRC from causing further
injury to the government.
Pagcor closed the casino in March 1998, after accusing
Mondragon of allegedly "blatantly" violating the provisions
of their agreement including the firm's refusal to pay the
75-million-peso (US$1.9 million at PhP39.828:US$1) "minimum
guaranteed consideration" due Pagcor for 1997. Mondragon
also allegedly violated the operation agreement when it
changed some casino rules to reduce Pagcor's share of
casino revenue.
Before the parties can patch up their differences, Pagcor
decided to shut down the casino operations. On April 1,
1998, Pagcor served the notice of closure. The trial court
issued a restraining order preventing the casino from
closing shop. The Court of Appeals later extended the TRO.
Mondragon denied all accusations, begging the Supreme Court
to order the casino reopening. It insisted the unilateral
closure last year was "illegal."
MLRC said the Court must not allow its one-billion-peso
(US$25 million) investment go to waste by preventing it
from continuing operations. Aside from the permanent
closure, Pagcor also wants Mondragon to pay the government
several hundreds of millions of pesos in the form of lost
revenue aside from damages due. (Business World 14-Sep-
1999)
=================
S I N G A P O R E
=================
MAYFRAN INT'L: Posts annual loss
--------------------------------
Sesdaq-listed textile firm, Mayfran International Ltd,
yesterday posted a $1.5 million loss for its full-year
ended June 30 and blamed it on a stock write-off of some
$1.5 million and poorer sales in its interim period.
Mayfran's full-year loss stands in contrast to a profit of
$1.1 million it made the previous year. The group said
turnover for the period fell 26.4 per cent to $17.25
million. Mayfran racked up lower turnover in first half
1999 as consumers continued to exercise caution during the
year-end festive period and credit controls were imposed by
the company. But it added that turnover for second half
1999 rose 15.4 per cent over the first half as regional
economies showed signs of improvement in early 1999.
For FY99, Mayfran posted losses per share of 2.3 cents,
which compares to an earnings per share of 1.8 cents the
previous year. As for the group's net tangible assets per
share, this fell 3.1 cents to 20.8 cents. The group's
operations in Singapore and Hongkong recorded operating
losses of $1.3 million and $250,000 respectively. A 2 per
cent final dividend was declared. (Business Times 14-Sep-
1999)
===============
T H A I L A N D
===============
PHYATHAI III HOSPITAL: Stock to be repossessed
----------------------------------------------
Prasit Patana Plc will repossess 8 million shares, or a
26.67-per cent stake in Phyathai III Hospital Plc, recently
sold to Phyathai Phuket Hospital Co Ltd, because the latter
has been unable to pay for the securities.
The company now holds 19.08 per cent in Phyathai Phuket
Hospital Co Ltd and is a management adviser there as well.
In addition, the repossession is expected to clear the
shareholding structure and management in Phyathai III
Hospital Plc, in view of future financial prospects and an
anticipated increase in the the number of patients.
After the process is completed, the company's shareholding
in Phyathai III Hospital Plc will rise to 61.85 per cent
and then, as a result, Phyathai III Hospital Plc's
performance will be included in its parent company's
financial statement in the third quarter of the year.
(The Nation 14-Sep-1999)
THAI MILITARY BANK: Presents back-up recapitalization plan
----------------------------------------------------------
Thai Military Bank says it has prepared a backup
recapitalisation plan if its efforts to raise 12 billion
baht in new capital from new investors fails. The bank says
it will use 9.99 billion baht raised from its "Super-Caps"
issue of capital securities earlier this year to help
satisfy conditions attached to the government's
recapitalisation programme.
Shareholders yesterday approved plans to raise registered
capital to 30.65 billion baht from 10.15 billion through
the issue of two billion new preferred shares and 50
million common shares. The bank plans to raise half the
new capital under the government's tier-one programme, with
the remainder from private placement to local and foreign
shareholders.
But if the private placement failed, the bank would be able
to use funds already raised from the capital securities
issue to satisfy terms of the state capital programme.
Thanong Bidaya, TMB president, said a roadshow would be
staged at the end of the month to present the
recapitalisation plan to 80 to 100 institutional investors
overseas.
The bank's recapitalisation was expected to be completed by
October, he said. But whether prices would prove
satisfactory for the bank depended on numerous factors, Dr
Thanong said, including domestic political and economic
conditions.
"We are looking to raise 12-15 billion baht in capital,
after which we will apply for the state tier-one programme
to match the amount of preferred shares we can sell," he
said. "Regulators have already approved our application.
So if we can sell shares worth 12 billion baht, the state
will provide another 12 billion. And 24 billion baht in new
capital is sufficient for our purposes."
Thai Military Bank currently has a capital adequacy ratio
of 12.7%, with capital funds of 36.88 billion baht.
Non-performing loans stand at 31.5% of total outstanding
loans, with provisions set aside of 17 billion baht, or 60%
of its total required at the end of next year. Full
provisioning coverage under central bank guidelines will
require another nine billion baht.
The 50 million common shares approved for issue yesterday
will be placed with bank employees, priced at 15 baht and
with a condition preventing subsequent sale for five years.
Shareholders also approved placement of new shares to the
Royal Thai Army, which holds a 20.67% share of the bank, as
well as Channel 5, which holds 13.52% currently. But the
army has said it would not use its right to purchase new
shares.
Credit Suisse First Boston Corp. is advising the sale,
while Merrill Lynch Phatra Securities Ltd. and National
Securities Ltd. are the underwriters. As part of the
condition for receiving state capital aid, the bank will
immediately set up 100 percent provisioning for estimated
loan loss, a condition Thai banks are required to meet by
the end of 2000. Management could also be changed if the
new major shareholders deem appropriate.
Thai Military Bank will also issue 50 million warrants to
employees for free, said Thanong Bidaya, a director of the
bank. Each warrant will be convertible into one common
share at a price to be determined later. (Bangkok Post,
Bloomberg, Business Day 14-Sep-1999)
THAI OIL: PTT submits restructure plan
--------------------------------------
The Petroleum Authority of Thailand (PTT) has submitted a
US$1.3 billion debt restructuring plan for the heavily-
indebted Thai Oil Plc (ThaiOil) to the oil refinery's 124
creditors. The creditors now have 15 days to consider the
plan before they vote.
The debt restructuring plan for ThaiOil includes the merger
of its downstream oil business with ThaiOil, a share swap
and the conversion of ThaiOil's debt into equity. In
addition, PTT has sought to reduce the recapitalisation
plan for ThaiOil to $300 million from $350 million in
negotiations with the steering committee of all its
creditors.
PTT holds a 49 per cent share of ThaiOil, which stopped
servicing its debt of $1.3 billion in Nov 1998.
The source said the main reasons for ThaiOil's debt
restructuring was to restore creditor confidence and prove
that the refinery was economically viable with the ability
to compete in the oil market, especially over the next 3-5
years when the outlook was bleak. As a result, the
PTT/ThaiOil merger was clarified in the debt restructuring
plan to the extent that it could take place after the
restructuring plan is completed.
PTT currently holds the nation's largest oil market share,
at more than 30 per cent, while ThaiOil is one of the
country's largest oil refineries. However, the PTT source
said European, US and Japanese creditors have different
opinions on the share swap option.
Japanese creditors, which hold about 40 per cent of
ThaiOil's total debt, want the restructuring plan to
specify the timetable for PTT to buy back the shares over
the next 3-5 years. European and US creditors, meanwhile,
prefer to keep hold of their ThaiOil shares which they plan
to swap for PTT stock once the state enterprise is
privatised in order to get capital gains.
The source said the majority of creditors had agreed in
principle to the restructuring plan, which needs approval
from creditors holding 75 per cent of the total debt to be
implemented.
"We have demonstrated to the creditors that ThaiOil will
survive under the restructuring plan which details the
merger of PTT's oil business with the refinery to make the
restructuring easier. PTT intends to obtain majority
control of ThaiOil despite offers from strategic partners
[in Middle East] who are interested in the refinery. But
PTT wants to sell shares in other refineries instead of
ThaiOil," added the source.
The potential strategic partners, which have large crude
reserves, want to sell crude to PTT in return for equity
investment in the refinery sector. The reduced
recapitalization of ThaiOil from $350 million to $300
million will mean the the refinery's debt will be about
$100 million higher than expected because the ratio to
convert debt into equity will be altered to maintain PTT's
49.99 per cent ownership.
In addition, PTT has sought to extend the debt repayment
period from 5 years to between 10-12 and reduce interest by
$200-250 million as part of the debt restructuring plan.
In a related development, PTT announced that it was
considering forging a strategic equity partnership to sell
its other refinery assets, in the hope of retaining
majority control of ThaiOil, thus restoring creditor
confidence.
Regarding the strategic alliance, a senior PTT source,
speaking on condition of anonymity, added that PTT was
thinking of teaming up with one of the world's major crude
producers in the Middle East. The source said several crude
producers in Saudi Arabia, Oman and the United Arab
Emirates were interested in the equity partnership in
ThaiOil once the refinery's debt restructuring was
complete, but PTT preferred to sell shares in other
refineries. Among PTT's other assets are holdings in Star
and Bangchak refineries. (The Nation, Business Day 14-
Sep-1999)
S U B S C R I P T I O N I N F O R M A T I O N
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