TCRAP_Public/991020.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, October 20, 1999, Vol. 2, No. 204


* K O R E A *

DAEWOO ELECTRONICS: U.S. firm interest growing conditional
DAEWOO GROUP: Foreign creditors mixed about loss sharing
DAEWOO MOTORS: GM sending mixed signals on acquisitions

* M A L A Y S I A *

CAHYA MATA SARAWAK: Bonds are downgraded

* P H I L I P P I N E S *

FORTUNE TOBACCO: Supreme Court last resort for indicting
PETRON CORP.: Subject of gov't probe of tax-credit purchase
UNIWIDE GROUP: SEC committee seeking fresh capital

* T H A I L A N D *

BANGKOK EXPRESSWAY: Still servicing debts
CHATTAWATT MUTTAMARA: Bankruptcy suit filed against it
DBS THAI DANU BANK: Workforce reduction part of rehab
KULTHORN KIRBY: Facing possible delisting
THAI GYPSUM PRODUCTS: Gets informal approval of debt plan


DAEWOO ELECTRONICS: U.S. firm interest growing conditional
Walid Alomar, a US investment firm has proposed to take
over DEC. However, the signing of the main sales contract
originally scheduled for September 9, has been delayed.
Commenting on the reason for the postponement, Walid said
the breakout of Daewoo's financial crisis has led to the
delay since his firm must now consider the requirements of
DEC's creditors.

In an exclusive interview with the ChosunIlbo, Mr. Walid,
the firm's president, said that his intention to take over
DEC remains unchanged, but that his original evaluation of
DEC was based upon information on the group's performance
from 1996 to 1998. As Daewoo's workout plan was announced,
DEC operations suffered a severe setback, dropping in value
by half - from $3 billion to $1.5 billion. Walid also spoke
about plans for existing DEC management and employees,
saying the current management is highly trustworthy.

However, if his firm succeeds in taking over the Korean
firm, he will appoint a person of high international
reknown, as chairman to take charge of DEC's overseas
business which accounts for more than 90% of the

Bae Soon-hoon, former DEC Chairman and a former Minister of
Information and Communication, has been discussed as one of
the prospective candidates. Introducing the make-up of
Alomar, he said the firm is composed of 9 investment-
related firms and its strength lies in normalizing ailing
enterprises through international financing schemes.  

Meanwhile, negotiations for the sale of Daewoo Electronics
Co. are running into trouble, according to a creditor bank
source that said that high-ranking officials from the US
investment fund visited the main creditor Hanvit Bank
Saturday and presented an additional four conditions. The
conditions include: 1) Accounting books being in accordance
with US accounting guidelines, 2) Replacing management with
internationally known group, 3) Settlement of all loan and
credit relations with subsidiaries and 4) Assisting enough
operating funds by the creditors.

A high-ranking official of the Hanvit Bank said those
conditions are almost impossible to be accepted by
creditors. A financial source said Walid Alomar's move at
the final stage of the negotiation might be an indication
that the fund had failed to gather enough investors and
decided to get out of the negotiations. Hanvit Bank
official said it would prepare a detailed plan for a
workout independent of the sale negotiations with Walid
Alomar.  (Digital ChosunIlbo  19-Oct-1999)

DAEWOO GROUP: Foreign creditors mixed about loss sharing
The foreign creditor banks of Daewoo Group expressed a
mixed reaction toward the view of a key steering committee
member that the overseas lenders are now prepared to share
losses from the forced restructuring process.

Some said the agreement between the government and foreign
creditors on accepting losses will be an ultimate solution
for Daewoo's $5.05 billion overseas liabilities.  Others
argued they have not been approached with the idea of
taking losses, adding that such a view must be discussed
among all creditor banks before making it an official

"It is certainly a possible option," a foreign banker said
yesterday. "The two sides will not be able to draw any
conclusion unless the loss sharing issue is finalized. We
want some clear answers to the problem," the banker added.

Yet others were more critical on the view from the key
steering panel constituent, saying that loss sharing is the
issue which needs approval from all 200 foreign creditors.

"There has not been any discussion on the possibility of
sharing losses by the international financial community in
regard to the Daewoo case. It is just surprising to see the
article," said another foreign banker.  "Besides, the
proposed loss ratio of 30-40 percent is not acceptable. It
is too high."

A number of foreign banks even called for the immediate
disbandment of the steering body, saying that each member
is only trying to protect their own interests.

"There is no point having the steering panel. They are
supposed to protect everyone's share yet all they are
concerned about is how to address their own self-interests.
I do not see any point of having a representing body," said
another foreign banker in Seoul.

Earlier a key member of the committee expressed an
intention of sharing losses from the Daewoo crisis, asking
the Korean government to come up with a definite ratio for
the international banking community.  For the first time in
the last two months, since the committee was launched on
Aug. 18, a major foreign creditor offered a willingness to
take a certain portion of losses incurred by Korea's second
largest conglomerate.

While saying that the discussions presently taking place
between the government and Daewoo's foreign creditors are
redundant and time-consuming, the foreign banker added that
the two sides now need to approach the ratio for loss
sharing.  Mentioning the possible ratio of 30-40 percent of
their credits in Daewoo, the foreign banker said that a
clear guideline from the government is the only solution to
rescheduling Daewoo's $5.05 billion short-term debts.

Meantime, the committee called for the second meeting of
all 200 foreign creditor at Tokyo's Imperial Hotel on Oct.
28.  The Korean government will be represented by Oh Ho-
geun, head of the corporate restructuring committee of the
Financial Supervisory Commission.

The first gathering took place in Seoul on Aug. 18 in which
they formed the nine member steering body represented by
Chase Manhattan, Citibank, HSBC, ABN AMRO, UBS, Tokyo-
Mitsubishi, Dai-Ichi Kangyo, National Australia and Arab.
Through the steering panel, foreign creditors have demanded
that the government discuss with them prior to issuing any
debt restructuring plans for Daewoo.

They also provided a view through the committee that the
financial authorities provide a guarantee on their credits
in Daewoo should the group fail to repay their overseas
borrowings.  It is only then that they will agree to
refrain from legal actions to recover the short-term
credits in Daewoo.

However, the two sides have reached no accord on any of the
issues raised in the last two months.  The local
authorities conducted rehabilitation of Daewoo while
excluding the group's foreign creditors.  On the issue of a
government guarantee, the Korean authorities flatly ruled
out the possibility, saying the international standard does
not allow the government to offer assurances on private
sector deals.

The foreign creditors on the other hand also failed to live
up to their words of refraining from legal actions as some
have already filed law suits overseas to secure their
money.  (Korea Times  19-Oct-1999)

DAEWOO MOTORS: GM sending mixed signals on acquisitions
General Motors Corp. (GM) is sending mixed signals about
its alleged takeover bids for Daewoo Motor Co. and Samsung
Motors Inc., adding to the confusion over Korea's auto
industry shake-up.

GM Vice President Louis Hughes reportedly expressed an
intention to take over both Daewoo Motor and Samsung Motors
during his meetings with government officials in Seoul this
week, according to a vernacular paper report.

"The GM delegates did not rule out Samsung Motors as an
acquisition target and revealed plans to contact Samsung
officials on the issue shortly," the report said, quoting
an unidentified official at the Financial Supervisory
Commission (FSC).

It is the first time that GM has hinted at the possible
acquisition of Samsung Motors, though GM Korea officials
refused to comment on the FSC official's remarks.  The GM
executives also vowed to get into full-dress negotiations
with Daewoo Motor as soon as creditors complete asset
valuations and devise debt-rescheduling plans, the official

"In particular, GM expressed deep interest in Daewoo's
auto-component plants in China," he said, adding that the
Korean government reacted affirmatively to the U.S. giant's
acquisition plans.

In a contradictory development, however, GM president Rick
Wagoner told reporters in Tokyo Monday that it would be
difficult to complete talks on a key alliance with Daewoo
Motor this year. "Obviously it is complicated. There are a
lot of challenging issues to work through on both sides in
order to get it done by the end of the year," he said.

GM and Daewoo have been in capital tie-up talks for several
months and have aimed to wrap up negotiations by the end of
this year. But the two firms are reportedly wide apart on
pricing terms. Nevertheless, Wagoner unveiled strong
willingness to expand businesses in Asia saying, "The big
attraction is obviously that the Korean market is huge and
no one has got in there without local manufacturing."

Industry analysts say that GM's alleged suggestion of
taking over Samsung Motors appears aimed at drawing more
advantageous pricing terms in negotiations over Daewoo
Motor from the Seoul government.

"Daewoo Motor may be indispensable to GM's drive to seize
10 percent of the Asian market by 2005. But the U.S. auto
maker wishes to buy Daewoo plants at steep discounts,
without taking over its huge debts," said an analyst.

Last Thursday, Lee Ki-sup, a senior executive at GM Korea,
denied that GM was pushing to take over Samsung Motors and
Ssangyong Motor, a jeep-van maker affiliated with Daewoo.
He said that GM is now too devoted to its negotiations with
Daewoo Motor to find extra time to consider other merger
and acquisition issues in Korea.

"Takeover negotiations with Samsung or Ssangyong, if any,
will be possible only after talks with Daewoo are

Meanwhile, another FSC executive said that the government
is opposed to GM's proposal to take over Daewoo Motor's
profitable assets alone. He also noted that the widespread
rumor that Samsung may team up with GM to jointly take over
Daewoo Motor is groundless.  (Korea Herald  20-Oct-1999,
Digital ChosunIlbo  19-Oct-1999)


CAHYA MATA SARAWAK: Bonds are downgraded
Rating Agency Malaysia Bhd (RAM) has downgraded Cahya Mata
Sarawak Bhd's RM350mil redeemable unsecured bonds
(1996/2001) from A3 to BBB3.

RAM said in a statement yesterday that the downgrade
reflected the severe impact of the economic downturn on the
group's operations which had led to deteriorating financial
performance.  The RAm statement said that due to the
group's exposure to the construction, cement, steel,
stockbroking and banking sectors, the group's operation was
hard-hit by the economic recession.

Contracting demand for the group's products and services
eroded prospective earnings while the group's expansion in
its cement and steel plants in an overcapacity situation
added more pressure.  The challenging operating environment
caused by the sharp contraction of earnings potential also
heightened its financial risk profile.

The statement said, however, that being one of the largest
and well-connected conglomerates in Sarawak had ensured
Cahya Mata Sarawak a strong competitive advantage in
securing government projects and hence, this has provided
some cushion to a sharp decline in the group's performance
going forward.  (Star Online  19-Oct-1999)


FORTUNE TOBACCO: Supreme Court last resort for indicting
Twice rejected by trial courts, the Supreme Court is the
government's only hope in its effort to indict
controversial businessman Lucio C. Tan for allegedly not
paying taxes worth over 25 billion Philippine pesos (US$618
million at PhP40.45=US$1).

Last week, the Marikina Regional Trial Court finally junked
the appeal by the Department of Justice (DoJ) pushing for
the criminal trial for tax evasion of Mr. Tan, other
Fortune Tobacco Corp. officials and nine reported dummy
firms of the cigarette manufacturer.

BusinessWorld learned Marikina RTC Judge Olga Palanca
Enriquez dismissed the petition of the DoJ prosecution
panel to set aside technical legal rules that had blocked
the indictment of Mr. Tan and his co-accused.  But Ms.
Enriquez, in a three-page decision, said the period set for
appealing cases must be "strictly adhered to" and could not
be "relaxed" even in the interest of justice.

"Wherefore the government's motion for reconsideration is
denied for lack of merit," she said in her ruling dated
Oct. 13.

It was the second time the judge doused cold water on the
government's attempt to bring Fortune Tobacco officials to
trial for evading payment of PhP25.27 billion ($624.7
million) in taxes from 1990 to 1992. Last Aug. 25, she
turned down the request of government prosecutors to compel
Marikina Metropolitan Trial Court Judge Alex Ruiz to
continue hearing the tax suit and issue arrest warrants to
all the accused. She said the DoJ appealed the case 11 days

Government prosecutors brought the case to the RTC on July
17, claiming the BIR deliberately misinterpreted the Tax
Code to allegedly exonerate Fortune Tobacco officials from
their alleged nonpayment of ad valorem and value added
taxes and deficient payment of income taxes for the three

In favoring Mr. Tan and his associates, Judge Enriquez said
the government prosecutors "overlooked" the new rules on
the filing of review petitions based on the 1997 Rules of
Court and miscalculated the 60-day appeal period.
The Justice department promptly filed a motion for
reconsideration, persuading the lower court to disregard
legal rules and convict the accused for nine counts of tax

Without admitting it erred in its period computation, it
asked the presiding judge of Branch 273 to rule the case
based on the merits of the arguments presented and not on
"mere technicalities."  But Mr. Tan's counsel, former
Solicitor General Estelito P. Mendoza, opposed the move and
asked Judge Enriquez to stick to her decision.

Mr. Mendoza said legal rules should be strictly followed as
these are "indispensable to prevent delays and to orderly
and speedy discharge of judicial business. The DoJ panel
cannot claim that it acted in good faith. Its plea for
liberality cannot be entertained as only the Supreme Court
can suspend the rules," said Mr. Mendoza.

Mr. Mendoza's sentiments were mirrored in Judge Enriquez's
decision.  She said the DoJ failed to convince her that she
committed a serious procedural lapse when she dismissed the
case due to technicality. Thus, she has no choice but to
stand by her original ruling.

"The rules are simple and clear The period (for filing
appeals) is not merely a procedural requirement. It is
mandatory and therefore strictly adhered to," she said.
Justice Secretary Serafin R. Cuevas has said he will pursue
the tax case all the way up to the Supreme Court even if
Mr. Tan is a close associate of President Estrada.
BusinessWorld tried but failed to get the DoJ chief to
comment on the latest development.

Government prosecutors have 30 to elevate the case to the
High Tribunal for review.  (Business World  20-Oct-1999)

PETRON CORP.: Subject of gov't probe of tax-credit purchase
Three weeks after kicking off a graft investigation against
Pilipinas Shell Petroleum Corp., the Office of the
Ombudsman yesterday ordered its in-house probers to
determine the liability of Petron Corp. in the alleged
anomalous purchase of 615-million-peso (US$15.2 million at
PhP40.45:US$1) tax credit certificates (TCCs) during the
Ramos administration.

In a press conference, Ombudsman Aniano A. Desierto said he
has decided to include the former government-owned
petroleum company after evidence showed 246 TCCs worth
PhP614.6 million were transferred to Petron from 16 other
firms.  The recipients, mostly garments manufacturers,
reportedly "unlawfully" sold the tax discount instruments
to Petron sometime in 1997 to spare it from paying correct
import taxes.

Mr. Desierto told reporters documents revealed the Finance
department's One Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center approved the anomalous transfer despite the
"glaring fact that it was impossible" for Petron to supply
crude oil worth millions to the recipient-garments

"Our Fact-Finding and Intelligence Bureau (FFIB) found
Petron was given unwarranted benefits through the DOF's
manifest partiality and gross inexcusable negligence. The
department officials who approved the transfer did not even
look at the pertinent mandatory supply contracts, purchase
orders and Board of Investments registration certificates
evidencing Petron's link to these garments manufacturers,"
said Mr. Desierto.

Aside from officials of the 16 firms, mostly Chinese
textile companies, also set to be investigated are former
Finance Undersecretary Antonio P. Belicena and Tax Credit
Center executive director Uldarico P. Andutan, Jr.  Former
Petron president Monico Jacob, who has since transferred to
Shell, was also named respondent. He was joined by vice-
presidents Celso L. Legarda, Abdulasiz F. Al-Khayyal and
Apolinario G. Reyes; officer-in-charge for marketing
Reynaldo V. Camps and Industrial Trade Manager Rafael S.
Diaz, Jr. Messrs. Belicena and Andutan are already being
investigated for approving transfer of PhP356.7-million
(US$8.8 million) worth of TCCs to Shell in 1996 and 1997.

Shell was found to have illegally bought 93 certificates
from 23 manufacturing companies. Mr. Desierto insisted he
ordered the conduct of the preliminary probe against Shell
and Petron to allow government to recover millions in lost
revenue.  (Business World  20-Oct-1999)    

UNIWIDE GROUP: SEC committee seeking fresh capital
The committee formed by the Securities and exchange
Commission to rehabilitate Uniwide Group of Companies is
seeking a fresh infusion of P1.5 billion from new

The additional investments, according to the group headed
by former SEC associate commissioner Monico V. Jacob said,
should be made by next month to prepare Uniwide's retail
outlets for the advent of the Christmas season.  Of the
total amount, P1 billion will be used for stock
replenishment of all the stores while the remaining P500
million will be utilized for capital expenditures.

"The timing of the infusion is critical to provide a strong
jumpstart for the recovery of the retail business. Ideally,
the new money should come in two to three months before the
holiday season to take advantage of the bullish market,"
the receivership committee said.

The committee said Uniwide generates about 20 to 30 percent
of the annual sales during the Christmas season. The group
is negotiating with parties interested in acquiring its
warehouse clubs and commercial centers that included El
Shaddai founder Mariano Velarde and shopping mall magnate
Henry Sy.  

However, the receivership body said "securing new equity
also requires ... extinguishing most of the bank debts,
restructuring all other bank debts and payables, and
securing new credit lines with trade creditors."

Hence, the committee also asked securities regulators to
approve its plan to pay partially the company's P6.91
billion liabilities with its assets. The dacio en pargo or
payment in kind proposal is intended to reduce bank loans
of P6.91 billion. Uniwide's liabilities as of June this
year stood at P11.1 billion.

The plan also calls for the restructuring of the remaining
liabilities and the immediate infusion of P1.5 billion from
the owners.  Owned by businessman Jimmy Gow, the Uniwide
Group sought reprieve from the SEC in June on its P11.1
billion debts owing to severe liquidity problems brought
about by the financial crisis which erupted in July 1999
and the ensuing downturn in the economy.

Based on the appraisal conducted by the independent and
reputable firms selected by the creditor-banks, the total
appraised values of the properties available for dacion as
of end-September this year are at P6.09.  

Once the proposed rehabilitation plan is given the go-
signal by the SEC, the Uniwide group's retail business will
have to recapture its lost market share and generate
revenues of at least PhP12 billion (US$296.6 million) on
the first year and achieve profitability on the third year
of operations.  Under the plan, Uniwide's retail business
will have to implement a more aggressive marketing plan
through advertising and promotional campaigns.  (Manila
Times, Business World  20-Oct-1999)


BANGKOK EXPRESSWAY: Still servicing debts
Bangkok Expressway Plc has clarified that it is still
servicing debts as specified in its loan contract. The
clarification came after a report in Krungthep Turakij on
Oct 16 referring to Krung Thai Bank's auditor
PriceWaterhouseCoopers' report stating that loans
previously provided by the defunct First Bangkok City Bank
to BECL are now classified as substandard loans. All assets
of FBCB had already been transferred to KTB.  (The Nation  

CHATTAWATT MUTTAMARA: Bankruptcy suit filed against it
A bankruptcy suit has been filed against Chiang Rai MP
Chattawat Muttamara for allegedly defaulting on payment of
30 million baht for land bought from Vichai Thepawal.

Mr Vichai's request for the case to be transferred from the
Thonburi Civil Court to the Central Bankruptcy Court was
approved and the first hearing is set for today.  Mr Vichai
filed the case about two years ago and sought the transfer
to speed up the legal process.

According to Mr Vichai, Mr Chattawat, once a key member of
an alliance of MPs known as the Group of 16, had bought
land in Chiang Saen, Chiang Rai, for 30 million baht three
years ago. But Mr Chattawat's cheque bounced and requests
to pay up were ignored.  A witness testified in the Civil
Court that Mr Chattawat had borrowed more than 100 million
baht from each of several financial institutions and could
repay none of his debt. (Bangkok Post  19-Oct-1999)

DBS THAI DANU BANK: Workforce reduction part of rehab
DBS Thai Danu has become the latest commercial bank to
announce an early retirement program for 588 employees out
of its total workforce of 2,830, as part of the financial
institution restructuring plan.

Kongpop Watanasin, DBS Thai Danu Vice President for Human
Resouces Development, said that the bank had started its
voluntary retirement on August 1. The bank called for 500
voluntary resignations but 588 came forward by the end of
September, he said.  The package, said Kongpop, would cost
the bank 253 million baht. Each voluntary employee with
over 20 years experience was entitled to receive up to
thirty month severance pay.  Kongpop said the early
retirement plan was not aimed at reducing the size of the
bank, but to help restructure the working system.

The bank put forward the plan to give the opportunity for
those employees who may not be able to adapt to the new
system or those who could not wait until the new working
method was put into practise.  He added that the bank was
planning to recruit new personnel, especially those who
possess expertise in small banking businesses and have the
ability to handle the bank's non-performing loans (NPLs)

Earlier three big banks - Krung Thai Bank (KBT), Thai
Farmers Bank (TFB), and the Bank of Ayudhya - announced
their early retirement plans.  The most numerous employees
to face the early retirement option are those working with
the state-run Krung Thai Bank.  Approximately 6,000 Krung
Thai employees will be "voluntarily" retiring early next
year.  (Business Day  19-Oct-1999)

KULTHORN KIRBY: Facing possible delisting
Kulthorn Kirby Plc's 15 million shares have been allowed by
the Stock Exchange of Thailand to list on the exchange,
starting today. However, KKC faces a possible delist and is
in a rehabilitation process. The SET has suspended all
securities of KKC until the causes of delisting are
eliminated.  (The Nation  20-Oct-1999)

THAI GYPSUM PRODUCTS: Gets informal approval of debt plan
Thai Gypsum Products yesterday said that its restructuring
plan had been approved by more than half of the firm's
creditors.  The company said a formal vote by creditors had
not yet been held.  (Bangkok Post  19-Oct-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
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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.

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