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/raid1/www/Hosts/bankrupt/TCRAP_Public/991101.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 Monday, November 1, 1999, Vol. 2, No. 212 Headlines * C H I N A & H O N G K O N G * CHINA ELEGANCE INT'L.: Posts annual loss CHUN TAI TOYS (CHINA) CO.: Facing winding up petition FORTUNE OIL: Posts first-half loss as Y2K problems loom GIANTON COMPANY: Facing winding up petition KONSUN INTERNATIONAL LTD.: Facing winding up petition OCEAN IMPORTERS & EXPORTERS: Facing winding up petition SAM TAT LEATHER GOODS: Facing winding up petition WINGER ELECTRONIC FACTORY: Facing winding up petition WONDERFUL PALANCE LTD.: Facing winding up petition ZHEJIANG SYNTHETIC UNITED: Closes debt-for-equity swap * J A P A N * HYOGO PREFECTURE: Going under gov't control after losses OKI ELECTRIC INDUSTRY: Posts lower six-month loss SEIYO CORP.: May get bailout from Seibu Dept. Stores * K O R E A * DAEHAN INVESTMENT TRUST: Gov't funds infusion near DAEWOO GROUP: Workout plans for 4 units revealed DAEWOO GROUP: Negotiations with foreign creds. to continue DONGAH INS.: Awaiting funds injection by KDIC DOOWON INS.: Awaiting funds injection by KDIC HANDUK INS.: Awaiting funds injection by KDIC HYUNDAI ELECTRONICS: To use rights issue to reduce debts JOSUN INS.: Awaiting funds injection by KDIC KOREA INVESTMENT TRUST: Gov't funds infusion near KUKMIN INS.: Awaiting funds injection by KDIC PACIFIC LIFE INS.: Awaiting funds injection by KDIC * M A L A Y S I A * MALAYSIAN RESOURCES CORP.: Posts larger annual net loss TECHNOLOGY RESOURCES INDUS.: Holding breath on coupon bonds * P H I L I P P I N E S * ABN AMRO ASIA SECURITIES: SEC to discipline ALL ASIA SECURITIES MGMT. CORP.: SEC to discipline DBP DAIWA SECURITIES: SEC to discipline FORTUNE TOBACCO: Gov't may try to settle out of court ING BARING SECURITIES: SEC to discipline JARDINE FLEMING EXCHANGE CAPITAL: SEC to discipline PCCI SECURITIES BROKERS: SEC to discipline PHILIPPINE AIRLINES: Bracing for loss of gov't protection PRYCE SECURITIES: SEC to discipline WORLDSEC INTERNATIONAL SECURITIES: SEC to discipline * S I N G A P O R E * GOLDTRON: Creditors reviewing draft of restructure LIM KAH NGAM: Creditors reviewing draft of restructure L&M GROUP: Creditors reviewing draft of restructure THAKRAL CORP.: Taking preliminary steps for restructure * T H A I L A N D * INTERNATIONAL ENGINEERING: SET orders loan guarantee report KR PRECISION PLC: Recapitalizing to shrink debt, investing LAND & HOUSES: Restructure includes 7-year debt rollover NATIONAL FERTILISER PLC: Reaches debt rehab with 4 banks THANARA CO. LTD.: Completes asset-for-debt swap ============================== C H I N A & H O N G K O N G ============================== CHINA ELEGANCE INT'L.: Posts annual loss ---------------------------------------- Leather fashion manufacturer China Elegance International Fashion has reported a net loss of $206M for the year ended March 31. The company had made three share placements in the period, raising $37.8M in net proceeds to reduce debt. The chairman, Cheung Ngan said that the fourth quarter is seeing slightly more orders but profits are expected to be lean due to demand for cheaper prices. CHUN TAI TOYS (CHINA) CO.: Facing winding up petition ----------------------------------------------------- The High Court of Hong Kong SAR has scheduled a hearing for December 22 on the petition of Karin Electronic Supplies Company Limited for the winding up of Chun Tai Toys (China) Company Limited. A notice of legal appearance must be filed on or before December 21. FORTUNE OIL: Posts first-half loss as Y2K problems loom ------------------------------------------------------- Fortune Oil posted an interim first-half loss, while warning its shareholders that it cannot guarantee an escape from Y2K computer problems either. The oil trading and infrastructure company, which is listed in London but does all its business in the mainland, said its extensive dealings with traders and its mainland joint ventures could be affected. "The group trades with a large number of counter-parties and whilst efforts have been made to check their year 2000 compliance, there can be no assurance that such counter- parties may not suffer disruption that affects the group's business," Fortune said. "Similarly the group has a number of joint ventures which are important to the group's business . . . however there can be no assurance that the businesses of the joint ventures may not suffer disruption." Fortune has already suffered a sharp deterioration in the group's performance which resulted in the dismissal of chief executive Barry Cheung Chun-yuen. The company made the Y2K warning as it unveiled its interim results to June 30. Turnover was down sharply to ś65.1 million (about HK$829.15 million), from ś183.9 million in the same period last year. Fortune made a pre-tax loss of ś960,000, against profits of ś2.05 million in the previous year's first half. The group has been badly hit by a sharp rise in overdue trade accounts and by Beijing's ban on diesel and petrol imports. But new chief executive Richard Wong Shiu-ki said Fortune was undergoing an overhaul to focus on oil-trading and infrastructure. "Costs have been reduced significantly, the riskier parts of our trading business have been eliminated, and we can now focus with confidence on infrastructure projects that offer significant long-term potential for growth," he said. Cost-savings of ś2.5 million on an annualised basis had been achieved, the company said, and it had completed the disposal of a trading joint venture. Fortune also reported that China National Petroleum, the mainland's largest oil group, was to take a controlling 45 per cent stake in Fortune's West Zhuhai Oil Products Terminal and Oil Storage Facility. The deal should boost the facility's performance and make it "the most used oil product terminal in southern China", Fortune said. Fortune said it would retain an 18 per cent stake and that the terminal was already seeing increased throughput since the deal. The group has also sold its branded lubricants business, although it has retained the Fortune name, which it said gave it scope for re-entering the business at a later date. The company said it had also received expressions of interest from mainland and multinational oil companies, to operate the group's network of petrol stations. Turnover in the trading business plunged to ś33.7 million, from ś174.4 million, although the company believes there are signs that crude-oil imports to the mainland will increase in the second half of the year. (South China Morning Post 30-Oct-1999) GIANTON COMPANY: Facing winding up petition ------------------------------------------- The High Court of Hong Kong SAR has scheduled a hearing for November 17 on the petition of Leung Mo Ping for the winding up of Gianton Company Limited. A notice of legal appearance must be filed on or before November 16. KONSUN INTERNATIONAL LTD.: Facing winding up petition ----------------------------------------------------- The High Court of Hong Kong SAR has scheduled a hearing for November 17 on the petition of CWF Piling & Civil Engineering Co. Limited for the winding up of Konsun International Limited. A notice of legal appearance must be filed on or before November 16. OCEAN IMPORTERS & EXPORTERS: Facing winding up petition ------------------------------------------------------- The High Court of Hong Kong SAR has scheduled a hearing for December 15 on the petition of Lee Kwok Wah for the winding up of Ocean Importers & Exporters Company Limited. A notice of legal appearance must be filed on or before December 14. SAM TAT LEATHER GOODS: Facing winding up petition ------------------------------------------------- The High Court of Hong Kong SAR has scheduled a hearing for November 10 on the petition of Orient Legend Investment Limited and Orient Global Investment Limited for the winding up of Sam Tat Leather Goods (Hong Kong) Limited. A notice of legal appearance must be filed on or before November 9. WINGER ELECTRONIC FACTORY: Facing winding up petition ----------------------------------------------------- The High Court of Hong Kong SAR has scheduled a hearing for December 15 on the petition of Chu Yuen Pui for the winding up of Winger Electronic Factory Limited. A notice of legal appearance must be filed on or before December 14. WONDERFUL PALANCE LTD.: Facing winding up petition -------------------------------------------------- The High Court of Hong Kong SAR has scheduled a hearing for December 15 on the petition of Ju Kwun Kau for the winding up of Wonderful Palace Limited. A notice of legal appearance must be filed on or before December 14. ZHEJIANG SYNTHETIC UNITED: Closes debt-for-equity swap ------------------------------------------------------ Three of the mainland's new asset-management companies (AMCs) and a state bank have combined to trade more than 700 million yuan (HK$653.5 million) worth of debt for equity in a polythene plant in Zhejiang province. China Oriental, China Cinda, China Huarong Trust and Investment and the China Development Bank are swapping 723.48 million yuan of debt in Zhejiang Synthetic United Group for 70 per cent of the company's stock. The deal, signed in Beijing on Thursday, represents the biggest debt- for-equity swap since the government launched the plan in April as a significant initiative to turn around ailing state companies, and it is the first involving four separate creditors working together. Each of the four leading state banks has set up an AMC to take over companies' bad debts. The swap will reduce Zhejiang Synthetic's debt burden from 94.3 per cent of assets to 45 per cent, the China Business Times reported yesterday. It will also cut the firm's annual debt payments by 45 million yuan. The deal involves restructuring the company and splitting the production and non-production assets, with the local government taking over the workforce and assets of the latter. This aims to turn the production part into a viable entity. Zhejiang Synthetic was set up in 1993 with investment from the China Development Bank and two state firms in Shaoxing to produce polyester. The costs of construction and equipment created a debt burden it could not pay. After lengthy deliberations with its creditors, the firm decided on the swap as the best way to create a new, viable company. As a result, it expects to turn a profit this year. China Orient, whose share of the deal is 491.88 million yuan, is the AMC set up by the Bank of China. China Cinda, whose share is 88 million, was set up by the China Construction Bank and China Huarong, whose share is 18.6 million, by the Industrial and Commercial Bank of China. The China Development Bank's share is 125 million. (South China Morning Post 30-Oct-1999) ========= J A P A N ========= HYOGO PREFECTURE: Going under gov't control after losses -------------------------------------------------------- A small financial institution in Hyogo Prefecture will be placed under local government control following its plea for help after suffering huge losses on so-called Princeton bonds, the local government announced Friday. Kita Hyogo Credit Cooperative spent 2.7 billion yen on the bonds issued by Princeton Economics International of the United States and asked the Hyogo prefectural government for help Thursday as the bonds have turned out to be worthless. (Kyodo News, NewsHound 30-Oct-1999) OKI ELECTRIC INDUSTRY: Posts lower six-month loss ------------------------------------------------- Oki Electric Industry, Japan's leading communications equipment manufacturer reported that its parent sharply reduced losses in the 6 months to September through restructuring. Net losses fell to 2.2B yen in the period from a loss of 22.2B yen a year earlier. Pretax losses dropped to 5.7B yen from 24.8B yen. Revenue slipped 2.8% to 208.3B yen. SEIYO CORP.: May get bailout from Seibu Dept. Stores ---------------------------------------------------- Seibu Department Stores Ltd. is considering selling some of its own shares to raise funds for a bailout of Seiyo Corp., a financially troubled real-estate developer of the Saison business group co-led by Seibu and supermarket chain operator Seiyu Ltd., industry sources said Friday. The major department store operator plans to sell its own shares to other companies in the Saison group at around 1,100 yen per share, the sources said. Seibu stock is unlisted. With the fund-raising scheme, Saison will ask creditor banks to forgive claims on loans to Seiyo, which is struggling under interest-bearing debts of some 400 billion yen as a result of the aggressive development of golf courses and resorts during the asset-inflated bubble economy of the late 1980s. Seibu, which has issued 138 million shares and owns 43%, or 59.47 million, of them, is in final talks with other group companies on the plan, the sources said. However, it is premature to say whether Seibu will win the nod from the other companies, they said. Seiyo was established in 1949 and has capital of 34.8 billion yen. Since 1995, it has been implementing a rehabilitation plan under an agreement with creditor banks to cut interest rates on its loans. The Saison group also includes Yoshinoya D and C Co., a fast-food chain operator, and Saison Life Insurance Co. (Kyodo News, NewsHound 30- Oct-1999) ========= K O R E A ========= DAEHAN INVESTMENT TRUST: Gov't funds infusion near KOREA INVESTMENT TRUST: Gov't funds infusion near -------------------------------------------------- The government is expected to inject approximately W3.4 trillion into the ailing finance firms, Korea Investment Trust and Daehan Investment Trust. A high-ranking official at the Ministry of Finance and Economy said Thursday, the money will be divided between the two companies with W2.3 trillion alloted to Korea Investment Trust and W 1.1 trillion going to Daehan. The official added that the ministry plans to announce a major policy to calm the fluctuating financial markets including plans to normalize management of the two investment trust firms. The government said W1.5 trillion of the total rescue fund will be from public funds. This amount will be raised through sell-offs of government-held shares at the Industrial Bank of Korea and Housing and Commercial Bank. (Digital ChosunIlbo 28-Oct-1999) DAEWOO GROUP: Workout plans for 4 units revealed ------------------------------------------------ Steering committees representing creditors of four Daewoo Group units yesterday decided to provide them with debt- relief steps to keep them afloat. The four units of the troubled conglomerate are Ssangyong Motor Co., Daewoo Electronic Components Co., Orion Electric Co. and Keangnam Enterprise Ltd. Creditors of Ssangyong Motor decided to convert its debts of 130 billion won ($107 million) into common stock equivalent to a 53 percent stake, said Cho Hung Bank, which has been charged with drawing up a workout program for the carmaker. Before the debt-for-equity swap, the creditors will reduce the carmaker's shareholder capital at a rate of 3 to 1 and postpone the repayment of an additional 1.6 trillion won in debts until December next year, Cho Hung said. The creditors will also cut the interest on 1.6 trillion won by between 1 and 4 percent and provide Ssanyong Motor with $240 million in trade finance. In addition, the creditors will seek to sell off the company to a third party by the end of next year, Cho Hung said. A recent due diligence study found that Ssangyong Motor has assets of 2.76 trillion won, while its liabilities amount to 3.09 trillion won. The steering committee of Keangnam Enterprise agreed to swap its 170 billion won debt for equity, said Korea Exchange Bank (KEB), Keangnam's main creditor bank. Keangnam's creditors will swap its remaining debt for convertible bonds and provide the company with interest cuts, the bank said. Keangnam's liabilities outweigh its assets by 70.5 billion won. The KEB said no debt-for- equity conversion will be granted to Orion Electric which was found to have assets exceeding its liabilities. Instead, Orion's creditors will lower the interest on its debt by between 1 and 3 percent, the bank said. Orion was found to have assets of 1.89 trillion won and liabilities of 1.71 trillion won. The steering committee of Daewoo Electronic Components will push ahead with the spin off of the company from the Daewoo Group and sell it off, its main creditor Hanvit Bank said. The company's creditors will delay the repayment of 63 billion won in debts to bank and non-bank financial institutions until the end of 2001, Hanvit said. Daewoo Electronic Components has assets of 365 billion won and liabilities of 292.6 billion won, the bank said. Creditors of the four Daewoo units will meet over the next few days to finalize debt-workout programs. The four are among Daewoo's 12 subsidiaries placed under rehabilitation plans. Meanwhile, a government official said yesterday that final debt-workout plans for Daewoo's four flagships - Daewoo Corp., Daewoo Motor Co., Daewoo Electronics Co. and Daewoo Heavy Industries Ltd. - will emerge two to three weeks later than scheduled. The delay is necessary to calculate the exact ratio of debts to be rescheduled, which Daewoo's foreign creditors have been calling for, the official said. The debts of the four Daewoo units amount to 49.67 trillion won, or 83 percent of the conglomerate's total liabilities. (Korea Herald 30-Oct-1999) DAEWOO GROUP: Negotiations with foreign creds. to continue ---------------------------------------------------------- Negotiations between the Daewoo Group and its foreign creditors on a debt moratorium will continue despite their failure to reach an accord at the Thursday meeting in Tokyo, Finance and Economy Minister Kang Bong-kyun said yesterday. During a speech at the Korea International Trade Association (KITA), Kang said the negotiations will take time. He said Daewoo's Korean creditors will go ahead with their debt-workout plans for the group's units as scheduled without the participation of foreign creditors. While rejecting the group's request for a repayment freeze, foreign creditors at the meeting demanded "a more positive role (in the workout process) than that of a non-voting observer," which is taken by Korean creditors as meaning that foreign creditors want the right to veto the workout plans to be implemented. (Korea Herald 30-Oct-1999) DONGAH INS.: Awaiting funds injection by KDIC DOOWON INS.: Awaiting funds injection by KDIC HANDUK INS.: Awaiting funds injection by KDIC JOSUN INS.: Awaiting funds injection by KDIC KUKMIN INS.: Awaiting funds injection by KDIC PACIFIC LIFE INS.: Awaiting funds injection by KDIC --------------------------------------------------- The government began preparations for the injection of public funds into six ailing life insurance firms. On Friday, the Financial Supervisory Commission (FSC) declared three life insurance firms, Kukmin, Pacific Life, and Doowon, as non-viable financial institutions and ordered them to reduce their outstanding capital to nil. The Korea Deposit Insurance Corp. was asked to inject W30 billion into each of the three firms. Three other companies, Dongah, Handuk, and Josun, are also following steps for the public fund injection. One official at FSC said the government rescue measure was taken in anticipation that losses at the firms could snowball due to the persistence of their poor financial status. (Digital ChosunIlbo 29-Oct-1999) HYUNDAI ELECTRONICS: To use rights issue to reduce debts -------------------------------------------------------- The electronics arm of South Korea's giant Hyundai group yesterday announced a US$602-million rights issue as conglomerates stepped up a fund-raising campaign to reduce their huge debts. Hyundai Electronics Industries said the offering of new shares was aimed at reducing its debt-to-equity ratio from 300 percent currently to a government-set target of 200 percent by the end of the year. "Proceeds from the new rights issue will be used to reduce our debt," a Hyundai Electronics spokesman said of the 725 billion won ($602 million) offering. The company has already raised over four trillion won so far this year to repay its debt estimated at 15 trillion won. Hyundai Electronics is not the only unit of the giant family-controlled conglomerate to resort to equity issues aimed at reducing debt levels. On the back of a stock market boom this year, the group's 16 subsidiaries have raised some 6.3 trillion won through local equity issues, or 56 percent of its year-end target of 11.2 trillion won. But the price was enormous. The group has pawned an array of family jewels including internal reserves and dollar deposits to repay debts, which stood at 64.9 trillion won in June, according to government accounts. "We are selling everything to meet the target," Lee Kyu- Taek of the group's restructuring team, said, conceding the government's demand was too tough to meet. Hyundai has raised the largest amount of equity funds among South Korean's leading conglomerates. The Korea Economic Daily estimated total equity issues and other funds raised by listed firms in the first nine months to September at 37 trillion won, or 8.1 percent of last year's gross domestic product. The daily warned the rush of rampant equity funds would seriously disturb a financial market already unsettled by Daewoo's debt problems. Hyundai, the country's largest conglomerate, or chaebol, stepped up its efforts to raise cash after the rival Daewoo Group was placed under a government program to dismantle it. Some foreign bankers here have also expressed concern over the fate of Hyundai's overseas debt in the light of the Daewoo debacle. Daewoo's troubles prompted foreign banks to reduce their exposure to South Korean corporations which have been under pressure to reduce the power of autocratic managements and speed up corporate reforms. And a recent stock market setback caused by Daewoo's crumbling sparked worries over Hyundai's ability to meet the target. But Hyundai, armed with many cash cows, set itself apart from Daewoo. Hyundai kicked off an international roadshow in Hong Kong last Monday to reassure overseas investors there before moving on to other locations like Singapore, London, Frankfurt, New York and Boston. (Business Day 29-Oct-1999) =============== M A L A Y S I A =============== MALAYSIAN RESOURCES CORP.: Posts larger annual net loss ------------------------------------------------------- Malaysian Resources Corp Bhd (MRCB) has reported a sharply higher group pre-tax loss of RM1.4bil for the financial year ended Aug 31, 1999, compared with a pre-tax loss of RM203.5mil the year before. Group turnover was 65.4% lower at RM235.3mil, against RM680.4mil previously. A statement from MRCB yesterday attributed the higher loss mainly to the group's provision for its RM1bil investment in Rashid Hussain Bhd (RHB), in line with the new management team's policy of transparency and good corporate governance. At the operating level, the group incurred a loss of RM89.7mil before interest, depreciation, amortisation and exceptional items. The statement said the group's reduced turnover was principally due to the completion of construction works in power-related projects during the previous year, an absence of further contributions following the sale of operations and maintenance of power plant subsidiary Teknik Janakuasa Sdn Bhd, and reduced activities in the property and construction sectors. "The financial performance of the group also continued to be affected by high gearing and foreign exchange losses," the statement said. MRCB said that despite the sluggish economy during the year under review, and the revaluation of its holdings, "the revenue and asset base of the group still remain strong and the group is able to meet all its obligations and has sufficient reserves for future dvelopment." The loss was posted nonetheless despite two associated companies posting profits. Malakoff Bhd reported a 61.4% jump in group after-tax profit to RM373.1mil for the year to Aug 31, from RM231.2 the previous year. The improved profit was due mainly to higher contribution from Teknik Janakuasa, full recognition of income from the Desa Kilat Sdn Bhd land reclamation project, a much improved performance in its investments and the effect of the tax waiver in 1999. Another MRCB associate company, New Straits Times Press (M) Bhd (NSTP), made a turnaround to register a pre-tax profit of RM75.8mil for the year ended Aug 31, after incurring a loss of RM59.8mil in the previous year. Turnover, however, declined by 11% due to cut-backs in spending by advertisers. MRCB also said its unit Sistem Televisyen Malaysia Bhd (TV3) had incurred a RM293.5mil loss for the year to August. However, it was able to report an operating profit before interest, depreciation, amortisation and exceptional items of RM15.2mil. (Star Online 30-Oct-1999) TECHNOLOGY RESOURCES INDUS.: Holding breath on coupon bonds ----------------------------------------------------------- Technology Resources Industries Bhd (TRI) said it has not redeemed any of its US$200mil zero coupon bonds which are due for early redemption yesterday, though some of its zero coupon bondholders had exercised their put-option for redemption by TRI at 148.6733% of the principal amount totalling US$272.072mil, reported AFX-Asia. It has another tranche of bonds, US$175mil 2.75% coupon bonds, which will fall for early redemption next month. TRI said it had not redeemed any of the zero coupon bonds nor placed any funds with the paying agent for a bond redemption on behalf of TRI. "The company is presently negotiating to restructure the bonds for new terms and conditions. We believe that the matter could be resolved amicably." A default will occur if TRI fails to pay either the principal, premium, or the interest on any of the zero coupon bonds when the same shall become due and payable on Nov 5, 1999. TRI said it would continue with negotiations to restructure the bonds for new terms and conditions. It, however, said that despite the potential default, the business and operations of the group had not been affected. Such a default will cause a technical default on some of the credit facilities obtained by TRI and the group, as well as the second tranche of euro bonds. The defaults, which cover credit facilities and the euro bonds, total RM1.38bil in principal and US$238.157mil, respectively. "TRI is currently in communication with the respective lenders," the statement said. Meanwhile, Tan Sri Tajudin Ramli said in a separate statement yesterday that TRI was negotiating with the bondholders to restructure the bonds on new terms and conditions. "We believe that we can reach a settlement accepted by the company and the bondholders," he said in the statement. "I wish to reassure you that this issue has not and will not affect our business and operations wither at TRI or Celcom at all." Tajudin said Celcom, TRI's main subsidiary and Malaysia's premier communications company, will continue to provide only the best service. (Star Online 30-Oct-1999) ===================== P H I L I P P I N E S ===================== ABN AMRO ASIA SECURITIES: SEC to discipline ALL ASIA SECURITIES MGMT. CORP.: SEC to discipline DBP DAIWA SECURITIES: SEC to discipline ING BARING SECURITIES: SEC to discipline JARDINE FLEMING EXCHANGE CAPITAL: SEC to discipline PCCI SECURITIES BROKERS: SEC to discipline PRYCE SECURITIES: SEC to discipline WORLDSEC INTERNATIONAL SECURITIES: SEC to discipline ---------------------------------------------------- The Securities and Exchange Commission plans to penalize the brokerage houses found to have violated the rules on special block sales. The brokerages involved were ABN Amro Asia Securities, All Asia Securities Management Corp., DBP Daiwa Securities, ING Baring Securities, Jardine Fleming Exchange Capital Inc., PCCI Securities Brokers Inc., Pryce Securities Inc., and Worldsec International Securities. An official says the SEC has rejected a recommendation of its Brokers and Exchanges Department to absolve the brokers because these did not violate the rules deliberately. He says the agency has told the department to determine the commission each broker received from the block sales. The fines will be computed based on the commissions. The official says the department is also studying how much to penalize the Philippine Stock Exchange for failing to impose its rules on special block sales. He says the department is considering P200, 000. The department found the rule violations during a random audit of eight brokerage firms that handled special block sales in April and May. The department did not say if all eight violated the rules, but it said some executed special block sales before the requests were approved by the stock exchange's floor trading arbitration committee. Some trades were not executed according to the price agreed by the counter parties and as approved by the committee. Unlike direct transactions through the open market, block sales are negotiated sales between two parties that must be approved by the floor trading arbitration committee. The minimum transaction value allowed is P5 million. All block sales must not be more than two fluctuations away from previous trade provided the cross price is within the best bid and offer. The Brokers and Exchanges Department also said the custodian banks had not been transparent in their transactions as they bought and sold without disclosing the beneficial owners. Some bought shares at a discount and profited by selling them below the market price, hence competing with investors. The department says those sales could not be identified from the trail leading up to the rest of the regular transactions. They were pooled from different sellers and bought by different buyers, and were thus sold or purchased at different prices in violation of one transaction rule. It says only foreign clients benefit from these transactions as they buy and sell securities among themselves; the discount does not flow down to the small local investors. Block sales can be used to manipulate prices because they often induce other investors to buy or sell. When block sales occur, the prices of stocks are affected because the market reacts accordingly. To protect small investors and curb illegal trading, the SEC wants to limit special block sales. It has suspended block sales at the stock exchange until it comes up with acceptable rules. The commission wants the exchange to approve applications for block sales only if their purpose is to obtain strategic control in the management of a corporation or to get elected in the board. The value of block sale transactions in May reached P49.24 billion. That was 60 percent higher than the P10.91 billion in April. (Manila Times 29-Oct-1999) FORTUNE TOBACCO: Gov't may try to settle out of court ----------------------------------------------------- The Philippine government may agree to settle out of court a 25-billion-peso tax fraud case filed against Fortune Tobaccor and its ethnic Chinese tycoon Lucio Tan, Justice Secretary Serafin Cuevas said. Cuevas said the government was looking for "another alternative" to settle the case. "There are developments which I cannot reveal right now. Whether it's a compromise or what, I'll let you know at the appropriate time," he told reporters. He acknowledged however that "consultations" were underway with Tan's lawyers and that "if there will be a resort to the other alternatives, it will be to the best interest of the Filipino people." Tan, whose empire spans banking, beer, cigarettes and airlines, has been accused of using dummy firms to evade taxes. The court's have dealt the government several legal setbacks, weakening the case against the businessman, a close friend of President Joseph Estrada. (Balita News 28-Oct-1999) PHILIPPINE AIRLINES: Bracing for loss of gov't protection --------------------------------------------------------- Philippine Airlines (PAL), struggling to recover from near- bankruptcy, must brace itself to lose government protection and live with international competition, President Joseph Estrada said Friday. But he also admitted Philippine aviation authorities were still engaged in "government to government talks" with Taiwan over a suspended air agreement that PAL charged was allowing Taiwan airlines to poach its passengers. "I will now advise Philippine Airlines to shed its preference for protection and strengthen itself for competition," Estrada said in a forum with foreign correspondents here. "In re-examining all our air agreements, our aviation authorities should seek to trade competitive opportunities rather than protective restrictions with other countries." Manila had acted to prevent a collapse of PAL to ensure the "survival of a national institution and icon", and not to help its owner Lucio Tan, who is a close political ally, Estrada said. The Philippines on October 1 suspended its air agreement with Taiwan, charging that Taiwan airlines were violating the conditions of the agreement and competing unfairly with PAL. Both countries have been negotiating for a new agreement and Estrada affirmed that once the negotiations with Taiwan are finished, the Philippines will take up its air agreements with South Korea and Singapore-- two other countries whose airlines are allegedly competing unfairly with PAL. However travel and tourism groups charge that the government's moves to protect PAL are hurting local tourism and business prospects and forcing Filipino travellers to pay higher fares for overseas travel. PAL, Asia's oldest carrier, temporarily shut down in September last year under debts amounting to 2.2 billion dollars. It has since returned to the skies with drastically limited operations and Estrada has admitted scrapping of air links with Taiwan was a move to protect the financially troubled carrier. (Balita News 29-Oct- 1999) ================= S I N G A P O R E ================= GOLDTRON: Creditors reviewing draft of restructure LIM KAH NGAM: Creditors reviewing draft of restructure L&M GROUP: Creditors reviewing draft of restructure ------------------------------------------------------ Updating shareholders on their status, three beleaguered companies -- Lim Kah Ngam (LKN), Goldtron and L&M Group Investments -- yesterday said they believed they could continue as going concerns. In separate statements to the Stock Exchange of Singapore, the three said this was because their respective creditor banks remained supportive of their proposed restructuring schemes. "The creditor banks remain supportive of the group's proposed restructuring scheme as evidenced by a majority of the financial creditors indicating their in-principle support of the scheme," Property and construction group LKN said. "The creditor banks are now reviewing the first draft of the restructuring agreement." Late last year, LKN announced it was in technical breach of financial covenants due to a fall in the value of its property assets. Its lenders agreed to a standstill agreement, leading to a restructuring of its credit facilities. In a separate statement, L&M said there were "reasonable grounds" to believe it could remain in business because "the creditor banks remain supportive of the L&M group." The banks "are considering the broad outline of financial restructuring options presented by special accountants Ernst & Young along with tentative terms of a proposal to list one of L&M Group's major subsidiaries, L&M Geotechnic." Also, it said its substantial shareholders were supportive of the company with conditional offers to subscribe for 30.7 million new shares and provide a credit line of up to $7 million. In the same manner, Goldtron said its "creditor banks have indicated that they will support the company pending the finalisation of a comprehensive restructuring of its businesses and borrowings." All three said they believed sufficient pertinent financial information was being disseminated to the market to prevent the establishment of a false market in their stocks. (Straits Times 30-Oct-1999) THAKRAL CORP.: Taking preliminary steps for restructure ------------------------------------------------------- Ailing Thakral Corp said yesterday its financial adviser Arthur Andersen Associates was "in the final stages" of gathering information about the group and its businesses. When completed in the middle of next month, it "will begin discussions" with Thakral on how to restructure its finances and businesses. (Straits Times 30-Oct-1999) =============== T H A I L A N D =============== INTERNATIONAL ENGINEERING: SET orders loan guarantee report ----------------------------------------------------------- THE Stock Exchange of Thailand has asked International Engineering Plc (IEC) to clarify all transactions involved in the Bt1.2 billion loan guarantee for M Group Plc and submit a report to the exchange by Wednesday. SET senior vice-president Patareeya Benjapholchai also said that IEC must settle the issue before Dec 3. The order has been issued after IEC's board of directors failed to identify an official who could be held responsible for the company's financial losses following the loan guarantee for the M Group which borrowed Bt1.2 billion from Krung Thai Bank in 1996. As of now, the company is yet to reveal any information involved in the issue. M Group, which is majority owned by media tycoon Sondhi Limthongkul, is a major shareholder in IEC. IEC reported in a filing to the SET yesterday that its board members have agreed to pass on their rights to the shareholders to decide the issue. The loan guarantee was made in 1996 but IEC never disclosed the information to the public. IEC now has to shoulder the financial burden from such a loan guarantee as the M Group has failed to honour the debt obligations. M Group has a total of 16.4 per cent stake in IEC and holds a 50 per cent stake in the financially ailing Manager Media Group Plc. The Securities and Exchange Commission (SEC) had recently asked the IEC for more information on the loan guarantees and had set the previous deadline at Aug 23. Part of the information requested by the SEC was that the company must state clearly who approved such loan guarantees. If an individual director did approve the guarantee, the company could clearly run into trouble. Since the IEC has failed to provide the necessary information as requested by the SEC, it is being charged Bt3,000 per day until the SEC receives a full disclosure of information. The company has also been fined Bt100,000 according to the SEC Act. The company reported a net loss of Bt354.15 million in the first half of 1999 against Bt219.10 million in the same period of the previous year. (The Nation 30-Oct-1999) KR PRECISION PLC: Recapitalizing to shrink debt, investing ---------------------------------------------------------- The shareholders of leading hard disk drive component maker KR Precision Plc have approved the company's recapitalisation plan under which funds will be raised for debt reduction and investment in new technology. The plan is in line with the company's forecast of a return to full profitability next year. Shareholders unanimously voted to approve the recapitalisation plan proposed by the management and its financial adviser, AIA Capital, at a meeting on Oct 27. The plan forms an essential part of the debt-restructuring programme, which was approved by creditors under the Bank of Thailand-supervised Corporate Debt Restructuring Committee on Sept 22 and formalised in documents signed on Oct 13. KR Precision plans to increase its registered capital through the private placement of 42,271,000 new shares at Bt20 apiece to Prudential Asset Management Asia, and a rights issue to current shareholders at the ratio of one new for three existing shares for a total of 17,730,000 shares at Bt10 per share. The capital increase will raise approximately Bt1.12 billion, of which some Bt702 million (US$18 million) will be used to settle in full KR Precision's outstanding $36 million in debt liabilities. The balance of the proceeds, around Bt420.7 million, will be used over the next 18 months to invest in new technology and to replenish working capital. Prudential Asset will hold approximately 39.55 per cent of the enlarged share capital on a fully-diluted basis if the rights issue is fully subscribed. In the event that it is not fully taken up, Prudential Asset has committed itself to investing a maximum of $27 million in order to ensure that KR Precision is adequately capitalised. "This investment in KR Precision represents an important milestone in the company's history as it brings a new focus and well-defined performance goals at a critical time. Prudential Asset Management Asia takes a long-term view of its investment and is seeking to help KR Precision grow into a major industry player," KR Precision president Dale Schudel said in the company's statement. "Management looks forward to working closely with this major new investor in order to regain market share lost over the last two years and to start to challenge for a bigger share of a dynamic market place." Schudel said that management was confident that post- restructuring, the company will be in a very strong competitive position as one of the immediate benefits of the company's revamp will be increased customer confidence. Having added Quantum and Western Digital as major new accounts in 1999, he said KR Precision would continue to diversify its customer base. Nevertheless, the company will continue to service Seagate Technology Inc, its major customer, in order to build on its long relationship and to fully exploit its strategic location. The company's core business is the manufacture of precision suspension assemblies for hard disk drives. Its local operations include tooling and dieing, chemical etching, suspension manufacturing, and advanced manufacturing activities. It has sales and marketing and new product development staff located in the United States. (The Nation 29-Oct-1999) LAND & HOUSES: Restructure includes 7-year debt rollover -------------------------------------------------------- Land & Houses (LH), the country's largest housing developer, has nearly completed its 18 billion baht debt restructuring plan with over 90 percent of the debts to be rolled over for seven years, according to the company's Executive Vice President Adisorn Thananun-narapool. Fifteen creditors, accounting for 98 percent of the 18 billion baht debt, have signed an agreement backing the plan. "Only three creditors, accounting for 2 percent of the debt value, have yet to sign the agreement. One is expected to do so next month, while the other two may delayed until early next year due to problems of their own," he said in an interview with Business Day. Most of the creditors agreed to roll over debt for seven years with a minimum lending rate (MLR) and a 2-year grace period. On top of that, 220 million baht or about 1.22 percent of the debt value, will be converted to convertible debentures, he said. Adisorn said the company's shareholders yesterday approved a capital increase of 292 million shares worth 2.92 billion baht. When including the existing 4.53 billion baht, the company's register capital will be 7.45 billion baht. Of the increase in capital, about 94 million shares will be sold to a new partner - the Government of Singapore Investment Corporation (GIC) - and the remainder to existing shareholders at 14 baht apiece. GIC recently bought new shares worth 1.32 billion baht to give the company a 20 percent stake. He said the new capital would be used as working capital, debt repayment and for setting up a property fund. The property fund has already been registered with a minimum stake of 500 million baht. "The fund was established to be a channel for new investment", he said. The company will use the fund to purchase cheap property with low risk from banks. "We will purchase whatever projects with low risk. Under construction condominium project is among them. The plan should be in practice next year." (Business Day 29-Oct- 1999) NATIONAL FERTILISER PLC: Reaches debt rehab with 4 banks -------------------------------------------------------- National Fertiliser Plc (NFC) has restructured its debt and is now looking forward to expansion. With the accords in place the future looked bright, Kamolchai Patarodom, president of the partially state-owned company, said yesterday. The way was clear to double the Rayong fertiliser plant's annual capacity to 800,000 tonnes next year, building on expected 4% growth in domestic demand for fertiliser, he said. Under the deal struck with creditors on Wednesday, the four Thai creditor banks-Siam City Bank Plc, Siam Commercial Bank Plc, Krung Thai Bank and the Industrial Finance Corporation of Thailand-will convert debts totalling 2.1 billion baht into shares. NFC will issue 420 million common shares at 10 baht par value. Through private placement, the creditor banks will take 105 million shares each, at five baht a share. The proceeds from the private placement will be used to repay long-term loans totalling 525 million baht to each bank. Then the NFC will issue 600 million new common shares and offer them under a rights programme to existing shareholders at five baht each. NFC's shareholders, the Petroleum Authority of Thailand, Government Saving Bank, Industrial Finance Corporation of Thailand, Finance Ministry and creditor banks have agreed to accept 419.32 million shares under the rights scheme. The proceeds will be used to repay overdue trust receipts and as part of working capital to pay for imported raw materials, as well as to finance operations. Repayment of accrued interest to date will be deferred for repayment by instalment between 2009 and 2011. Long-term loans totalling about 6.2 billion baht will be repaid by instalment, twice a year, between June 2001 and December 2011. In addition, the annual interest on long-term loans accruing from October this year to October 2001 will be charged at the minimum lending rate minus two percentage points, after which the minimum rate will apply. Short-term loans and trust receipt loans will be subject to the minimum overdraft rate. Before the first repayment under the new schedule, any surplus cash from operations will be repaid to creditors. (Bangkok Post, The Nation 29-Oct-1999) THANARA CO. LTD.: Completes asset-for-debt swap ----------------------------------------------- ICC International Plc's board has allowed the company to accept 22 land titles with a combined assessed price of about Bt500 million from Thanara Co Ltd, in order to settle Thanara's recently-incurred debts of around Bt754.61 million with the company. (The Nation 29-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 newsletter co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ USA, and Beard Group, Inc., Washington, DC USA. Debra Brennan and Lexy Mueller, Editors. Copyright 1999. All rights reserved. ISSN: 1520-9482. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR -- Asia Pacific subscription rate is $575 for 6 months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. *** End of Transmission ***