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/raid1/www/Hosts/bankrupt/TCRAP_Public/991125.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 Thursday, November 25, 1999, Vol. 2, No. 230 Headlines * C H I N A & H O N G K O N G * KUNMING SHIPPING EQUIPMENT: Signs debt-for-equity swap deal * I N D O N E S I A * ASSN.OF INDONESIAN REAL ESTATE: Assets to be requisitioned PT SUNSON TEXTILE MANUFCTR.: Reschedules U.S. loan debt * J A P A N * TAIHEIYO CEMENT CORP.: Posts 6-month loss * K O R E A * DAEWOO CORP.: FSC steps back from court receivership DAEWOO ELECTRONICS: Workout plan finalized DAEWOO GROUP: Workout plans running 1-2 weeks late * M A L A Y S I A * FRASER & NEAVE HOLDINGS: Posts annual loss MAN YAU PLASTIC FACTORY: Facing winding up petition * P H I L I P P I N E S * JOLLIBEE FOODS CORP.: Must defend derivative suit NATIONAL STEEL CORP.: Gov't drafting rehab plan * S I N G A P O R E * POWERMATIC DATA SYSTEMS: Posts wider 6-month loss REGAL HOTELS INT'L HOLDINGS: Debts to fall after sales * T H A I L A N D * BANGKOK BANK OF COMMERCE: Collection afoot on defunct loans BANGKOK METROPOLITAN BANK: Ex-execs face criminal charges PHONGSATHORN FAMILY: Promise to pay debt extinguishes suit PIZZA PLC: Stock falls on rumors of lost franchise pact REGIONAL CONTAINER LINES: Issues debt-slicing debentures SIAM COMMERCIAL BANK: Restructure completion by year-end THAI OIL CO.: Selling 26% stake in ThaiOil Power in rehab ============================== C H I N A & H O N G K O N G ============================== KUNMING SHIPPING EQUIPMENT: Signs debt-for-equity swap deal ----------------------------------------------------------- Two Chinese asset management firms and the China Development Bank have signed a deal to swap 219.96 million yuan (HK$206.51 million) in debts of a shipping equipment company for equity, the China Securities News reported yesterday. Kunming Shipping Equipment Group signed the debt-for-equity agreement Monday in Beijing with the asset management firms of Huarong and Cinda, and the policy bank, the official newspaper said. Of the debts, China Development swapped 119.62 million yuan, Huarong 80.32 million yuan and Cinda 20.02 million yuan, it said. The swaps reduced the debt-to-asset ratio of Kunming Shipping, based in the southwestern province of Yunnan, from 60 per cent to 46.6 per cent, the newspaper said. The swaps, which lowered interest payments, would enable Kunming Shipping to generate profits of more than 30 million yuan annually, it said. The company was also considering listing part of its assets on the stock market, the newspaper said, without giving further details. (Reuters, Hong Kong Standard 24-Nov- 1999) ================= I N D O N E S I A ================= ASSN.OF INDONESIAN REAL ESTATE: Assets to be requisitioned ---------------------------------------------------------- The Association of Indonesian Real Estate companies (REI) has announced that it would not contest the requisitioning of its assets by the Indonesian Bank Restructuring Agency (IBRA), under a debt restructuring program. REI general chairman Agusman Efendi said that whatever the decision of IBRA it would be adhered to by REI members, including loss of assets, as long as the procedure followed existing rules and procedures. "We are ready if we have to relinquish assets or equity, but there must clear criteria for which developer is suitable to be considered and which is not," he said. According to Agusman, if IBRA continues to put off the action and does not immediately restructure non-performing debts then it is predicted that within five years assets owned by developers will be exhausted to pay interest. Meanwhile, Darma Setyawan, another REI official, suggested that IBRA apply the principle of "good governance" in debt restructuring and the management of assets under its control. "What is most important for each and every IBRA official is to be free from corruption, collusion and nepotistic (KKN) practices and to apply the principle of good governance so that efforts that are being undertaken will be the best ever," he said. As a result of the prolonged economic crisis, not only do developers lack working capital, but they also cannot sell their completed houses, because the combined housing certificates are held by the bank as collateral. Demand for simple and very simple houses is still relatively high and housing credits are also available. For this reason Agusman suggested the government could transfer remaining completed houses not yet absorbed by the market to a housing credit scheme or construction credit scheme, thus enabling developers to restart their activities. (Asia Pulse 24-Nov-1999) PT SUNSON TEXTILE MANUFCTR.: Reschedules U.S. loan debt ------------------------------------------------------- A group of 11 banks led by the Chase Manhattan Bank has granted Indonesian company PT Sunson Textile Manufacturer Tbk (JSX:SSTM)a rescheduling of its syndicated loan of $ US36.67 million at 3% interest above SIBOR, for a three year period. According to Sunson President Director Purnawan Suriadi, an agreement to reschedule the loan over three years has been signed by representatives of the Chase Manhattan Bank who are acting as leader of the informal steering committee whose members include American Express Bank and PT Rabobank Duta Indonesia, together with eight other banks, domestic and foreign, such as NV De Indosische Overzeese Bank, Standard Chartered Bank, the Sanwa Bank, PT Bank Societe Generale Indonesia, the Sumitomo Bank and PT Sunson Textile Manufacturer in Jakarta. According to Suriadi, the $ US36.67 million, which represents around 80% of the total loan of $ US40 million, will be used as working capital and will be paid by installments within the agreed three years. Suriadi added that the banks' granting of the rescheduling shows the confidence which the banks have in the textile company, including confidence in the company's capability to improve its performance and to pay its debt as scheduled. According to Suriadi, the company recorded a net profit of Rp20 billion as of June 1999. Total sales by the end of 1999 are expected to amount to Rp500 billion, 70% of which originated from foreign exchange earnings from exports to Europe, USA, and Asia. (NewsHound 23-Nov-1999) ========= J A P A N ========= TAIHEIYO CEMENT CORP.: Posts 6-month loss ----------------------------------------- Taiheiyo Cement Corp (TSE:5233) posted 1.1 billion yen (US$ 10.34 million) in pretax loss for the six months ended September 30, the company said on Monday. The figure compares with the combined pretax profit of 4.8 billion yen recorded a year earlier by Nihon Cement and Chichibu Onoda Cement, which merged to create Taiheiyo Cement on Oct. 1, 1998. The downturn stemmed from a drop in cement demand triggered by stagnant private-sector investment in plant and equipment. Midterm sales shrank 8% to 121.9 billion yen, hit by declining prices and a 5% fall in domestic sales to 12.74 million tons. In contrast, the firm saw its environmental protection and recycling business score a 12% sales rise to 11.2 billion yen. Half-year operating loss came to 1.6 billion yen, compared with a 1.3 billion yen profit a year earlier. The nation's largest cement maker posted an extraordinary loss of 14 billion yen, mainly from an 8.6 billion yen increase in loan-loss reserves and an early retirement program costing 4.5 billion yen. The Tokyo-based company registered an extraordinary profit of 2 billion yen in the first half, partly from sales of shares in affiliated firms. It also benefited from a change to deferred tax accounting to the tune of 5.8 billion yen. Despite this, it suffered a midterm net loss of 7.4 billion yen, compared with a 3.6 billion yen net profit a year earlier. (Asia Pulse 24-Nov-1999) ========= K O R E A ========= DAEWOO CORP.: FSC steps back from court receivership ---------------------------------------------------- The Financial Supervisory Commission (FSC) said yesterday that there is less chance of Daewooo Corp. receiving court supervision, taking a step back from its tough policy against Daewoo's foreign creditors. Lee Hun-jai, FSC chairman, said there is little chance for Daewoo Corp. being supervised by the court due to its complex financial structure and heavy foreign exposure. He added that the company's debt will be rescheduled by credi or banks through workout processes. The FSC, along with domestic creditor banks, had delivered tough warnings to Daewoo's some 200 foreign creditors, saying the government would refer Daewoo Corp. for court receivership unless the overseas lenders comply with debt rescheduling. But now after realizing that it will eventually lead to a lose-lose situation for all involved parties, the FSC chairman withdrew from the earlier position and said there is little chance for Daewoo Corp. to be supervised by the court. Once Daewoo Corp.'s management is taken over by legal authorities, its recovery will be more difficult as the company's operations will basically come to a halt. Court supervision of Daeoo Corp. will also produce a huge number of unemployed workers, endangering the future of the Korean economy. However, Lee added that the financial authority is fully prepared against the worst scenario in order to minimize Daewoo Corp.'s impact on other sectors. The FSC head said that the government is considering to adopt a new process for Daewoo Corp. in which court receivership will be in effect immediately. The existing procedure usually takes over a month for the application for court receivership to be approved. The due diligence report stated that Daewoo Corp.'s total bank liabilities amount to $25 billion, 50 percent of the group's $50 billion in debts. With an average loss ratio of four major Daewoo subsidiaries estimated at over 50 percent, domestic creditors have agreed in principle to the workout scheme of converting a combined debt of $25 billion into equity. For other major business units of the group including Daewoo Motor and Daewoo Heavy Industries, Lee said that the finalization of workout plans will require a few more weeks. Initially the workout plans were due to be completed in the earlier part of this month. (Korea Times 24-Nov-1999) DAEWOO ELECTRONICS: Workout plan finalized ------------------------------------------ Domestic creditors of Daewoo Electronics Co. (DEC) yesterday finalized a debt-workout plan for the electronics unit of the troubled Daewoo Group, highlighted by a huge debt-for-equity swap. Local creditors of Daewoo Telecom, however, rejected a draft workout plan mapped out by its main creditor banks. Under the workout program for Daewoo Electronics, the domestic creditors will swap the company's debts of 1.46 trillion won ($1.25 billion) for equities equivalent to 394.7 billion won worth of common stock and 1.0653 trillion won worth of convertible bonds, said Hanvit Bank, DEC's main creditor bank. DEC will also be allowed to defer the payment of principal on its remaining debts until 2004, while creditors will grant interest rate cuts to the firm's remaining debts. The creditors will apply an interest rate amounting to the prime lending rate plus 1 percentage point to their collateralized loans to DEC, while an annual 1 percent interest will be imposed on loans without collateral until the end of 2002. Between 2002 and 2004, the interest rate on the loans not backed by collateral will amount to the prime lending rate plus a spread of 2 percentage points, Hanvit said. The rehabilitation program also calls for a capital reduction for DEC. The steering committee of DEC's creditors will determine the capital reduction ratio, the bank said. In addition, DEC's existing shareholders will be given the right to buy new shares to be issued by the electronics maker. The debt workout program, however, is subject to change depending on the results of negotiations with DEC's foreign creditors and the outcome of a final due-diligence audit on the firm, Hanvit said. According to a preliminary valuation report, DEC's assets amounted to 5.04 trillion won as of the end of August this year, while its liabilities stood at 7.72 trillion won. Meanwhile, domestic creditors of Daewoo Telecom, Ltd. refused to give the green light to a rehabilitation program for the firm yesterday, which focuses on a 1.34 trillion won debt-for-equity swap. "Except for the debt-for-equity swap proposal, creditors refused to give the required 75 percent approval on other points of the rehabilitation program," Daewoo Telecom's main creditor, Korea First Bank, said. As Daewoo Telecom's creditors failed to agree on the firm's workout program for the third time, the rehabilitation program will be put to arbitration by the Corporate Restructuring Coordination Committee, an advisory panel for local financial institutions. The workout plan also called for extending $210 million and 41.3 million won in trade financing to Daewoo Telecom and postponing the payment of principal on the firm's remaining debts. Creditors of Diners Club of Korea, an unlisted financial unit of Daewoo, also met yesterday to discuss a debt- workout plan for the firm, but they seemed unlikely to reach an agreement. The stickiest point in the proposed rehabilitation program was how to handle call loans of 579 billion won, which Nara Merchant Banking Corp. and Seoul Investment Trust & Management Co. lent to Daewoo Corp, said Korea First Bank, Diners Club's main creditor bank. (Korea Herald 25-Nov-1999) DAEWOO GROUP: Workout plans running 1-2 weeks late -------------------------------------------------- Financial Supervisory Commission (FSC) Chairman Lee Hun-jai said yesterday that the debt-workout plans for key Daewoo Group firms could be finalized one or two weeks later than scheduled. Lee said the negotiations between domestic and local creditors of the Daewoo Group on workouts for the key subsidiaries could take more time before an accord is reached. But Lee added that a conclusion is imminent because the talks are in the final stages. "Domestic creditors have waited long enough for foreign creditors' approval of their draft workout plans," Lee said. Workout plans for the Daewoo units were scheduled to be finalized by today, when the debt moratorium offered by domestic creditors is scheduled to expire. As regards Daewoo Corp., Lee said he personally believes the possibility of putting the company under court receivership is not high. Lee said the commission is moving to introduce a new type of bankruptcy proceeding which can reduce the impact of bankruptcy applications upon financial markets and other related firms. Under the current proceedings for court receivership, it takes one to two months for creditors to get the court's approval on preserving a bankrupt firm's assets, which heightens the chances of its subcontractors going belly up as well. Under the envisioned new procedure, which Lee called "prepackaged bankruptcy," the court is supposed to decide on asset preservation upon receiving a bankruptcy application, allowing creditors to implement their already prepared debt-workout plans immediately. Noting that inter-ministry talks are underway for the legislation of the new procedure, Lee said it will help minimize the impact of bankruptcy applications upon financial markets since it will not freeze debt payments and will allow creditors to carry out already agreed-upon workout plans. Lee said even if Daewoo Corp. is placed under court receivership, the company's construction and trading units would be spun off into independent firms, with all their debts transferred to a bad company which would ultimately be liquidated. Meanwhile, referring to the listing of life insurance firms, Lee said the commission still maintains the position that the contributions of past policyholders to an insurer's present value should be returned to society in one form or another. He suggested that insurance firms intending to list on the stock exchange create non-profit funds and contribute shares to them. (Korea Herald 25- Nov-1999) =============== M A L A Y S I A =============== FRASER & NEAVE HOLDINGS: Posts annual loss ------------------------------------------ Fraser & Neave Holdings Bhd (F&N) has registered a net loss of RM60.81mil for the year to September 1999, compared with an earlier profit of RM5.13mil. The company which makes glass containers, soft drinks and dairy products, recorded a turnover of RM1.157bil for the year to September 1999, compared with RM1.24bil previously. (Star Online 24-Nov- 1999) MAN YAU PLASTIC FACTORY: Facing winding up petition --------------------------------------------------- Man Yau Holdings Bhd has filed a winding up petition against its wholly-owned subsidiary Man Yau Plastic Factory Sdn Bhd due to the latter's failure to make payment on a RM340,894 advance given by Man Yau Holdings. Man Yau Plastic has ceased its business operations and its activities have been taken over by another subsidiary of Man Yau Holdings, which said the winding-up petition seeks to enable the group to recover as much as possible all outstanding amount owed to the company. It also aims to restructure the debts of the Man Yau group, which is currently in the process of proposing a comprehensive debts restructuring scheme to its creditors. It said the details of the restructuring will be announced once the scheme is formalised. (Star Online 24-Nov-1999) ===================== P H I L I P P I N E S ===================== JOLLIBEE FOODS CORP.: Must defend derivative suit ------------------------------------------------- Top fast-food chain Jollibee Foods Corp. is facing a derivative suit for not paying P336.07 million representing the cost of the six floors of the Jollibee Center Building on Ortigas complex in Pasig City. A derivative suit is an action taken by a stockholder of a corporation. The suit is aimed at preventing damage to the company when its board or any of its members refuses to initiate such action. The suit was filed with the Securities and Exchange Commission last month by spouses Chika G. Go and Corazon Go and Empire Estate Land Resources Inc. The complainants are minority stockholders of JP Properties & Venture Corp. Jollibee aside, the other respondents cited in the suit were Esther S. Ang, Ang Ngo Chiong, Azucena T. King, Gemma Tambunting, and Albany Resources Corp. They are the controlling stockholders of JP Properties that built Jollibee Plaza in the early 1990s. They are also stockholders of Jollibee. The suit also named as "unwilling petitioners" Elizabeth May Cheng, Paulino Cheng, and Marcelo G. de Jesus, who were said to have initially expressed interest in filing the suit but changed their minds later at the behest of the respondents. They are franchise holders of the fastfood chain. The petitioners submitted as evidence an agreement between Jollibee and JP Properties allowing the developer to use the "Jollibee" name for the project. The agreement, dated Sept.5, 1995, did not provide for the payment of royalties, though the property firm "agrees to sell six floors at cost" to Jollibee. The amount was not specified. The deal was signed by Ernesto Tanmantiong as Jollibee executive vice president and Esther Ang as JP Properties president. However, another deal between Jollibee and another company, JC Properties & Ventures Corp., provided for a down payment of P12.78 million equivalent to 20 percent of the purchase price of P63.91 million of 23 units of the fourth to fifth floor of "Jollibee Center." The signatories to the Dec. 1, 1999 agreement were JC Properties president William Tan Untiong and Jollibee executive vice president Ernesto Tanmantiong. In seeking the payment of P336.07 million, the petitioners told SEC hearing officer Macario Bacalla Jr. this was the actual cost of the six floors of the Jollibee Center Building and not P84.15 million that they claimed was imposed by the respondents. They said the P84.15 million would hurt JP Resources and "is clearly prejudicial and in conflict with the interest of the corporation." They also said underpricing the property "constitutes fraud against the government as it will deprive the latter of enormous amount of taxes." The petitioners, who like the respondents hold office at the sixth floor of the building, said the damage to JP Resources, its stockholders, and the government should be prevented by voiding the transactions to acquire the contested floors by the respondents. Aside from seeking to annul the deal, the petitioners are also asking for P2 million in moral damages, P2 million in exemplary damages, and P300,000 in attorneys' fees. (Manila Times 24-Nov- 1999) NATIONAL STEEL CORP.: Gov't drafting rehab plan ----------------------------------------------- The government is finalizing a rehabilitation plan for debt-ridden National Steel Corp. (NSC), but this will not involve any bailout, said Trade and Industry Secretary Jose T. Pardo. He told reporters yesterday the government is expected to finalize the rehabilitation plan in 10 days. He added he had already received feelers from a foreign investor interested in the company, but he refused to identify the firm. "The investor wants to meet with me to take a look at the rehabilitation plan," said Mr. Pardo, who also chairs the National Development Co., the government's holding firm for its 12.5% stake in the steel firm. He added the plan is being threshed out by government officials, "but we're still looking for the money." He stressed this will not involve any cash-out from the government and that the most government will do is to help facilitate the entry of a new investor in the company whose creditor banks have earlier initial foreclosure proceedings. "It is non-financial rehabilitation plan that government is pursuing." Mr. Pardo mentioned an effort to look into the market situation affecting possible rehabilitation, particularly imports of competing steel products. Asked whether the rehabilitation plan will include issuing a policy mandating a moratorium on cheap steel imports from Russia, he refused to comment. Earlier, NSC appealed to Malaca�ang and members of the House of Representatives for the government to temporarily restrict importation of competing products from Russia to allow the firm more time to recover and achieve competitiveness. NSC's suggestion was for the government to pattern the restriction after a recent agreement between the US and Russia, stipulating a one-year moratorium on imports and the setting of minimum import price for Russian steel in the following years. (Business World 24-Nov- 1999) ================= S I N G A P O R E ================= POWERMATIC DATA SYSTEMS: Posts wider 6-month loss ------------------------------------------------- Powermatic Data Systems has widened group net loss for the six months ended Aug 31 to $1.89 million from $667,000 in the same period a year earlier. Its results were hurt by lower interest and rental income, higher foreign exchange losses due to the weakening of the US dollar against the Singapore dollar, and higher marketing expenses incurred by its US subsidiary. Turnover grew 13 per cent to $22.46 million, boosted by higher sales from its computer networking business. No interim dividend has been declared. (Straits Times 24-Nov-1999) REGAL HOTELS INT'L HOLDINGS: Debts to fall after sales ------------------------------------------------------ REGAL Hotels International Holdings said its debts will fall by HK$3.40 billion (S$734.4 million) after a deal to sell 28 hotels to Millennium & Copthorne Hotels, a unit of CDL Hotels International, for US$640 million (S$1.1 billion). (Straits Times 24-Nov-1999) =============== T H A I L A N D =============== BANGKOK BANK OF COMMERCE: Collection afoot on defunct loans ----------------------------------------------------------- Bangkok Commerce Asset Management Co (BAM) yesterday started auctioning stocks pledged by fugitive banker Rakesh Saxena and politicians against loans, amounting to more than 60 billion baht, borrowed from the defunct Bangkok Bank of Commerce. The first lot put on auction yesterday consisted of 3.9 million shares of Indara Insurance Plc, once part of the business empire of whisky tycoon Charoen Sirivadhanabhakdi. The insurer was later taken over by Mr Saxena and Chattawat Muttamara, a former Chiang Rai MP. BAM won the auction with an offer of 16 baht apiece. The most recent closing price of Indara Insurance Plc on the stock market on November 2 was 12 baht. 28 Commercial Co, another Charoen-linked company, was the only other bidder. Mr Charoen is said to still control 14.15% of Indara, and wanted to regain a majority stake, said sources familiar with the case. BAM is attempting to find buyers for shares in several other companies that had been pledged by Mr Saxena and various associates before the BBC collapsed under the weight of its bad loans. Other lots to be sold off later include 5.24 million shares of Jalaprathan Cement Plc today, and 18.83 million shares of Phoenix Pulp and Paper Plc tomorrow. On the block on Friday will be 4.57 million shares of Precious Shipping Plc; 3.52 million shares of Sea Horse Plc; 12.94 million shares of Technology Applications Plc; and 27.7 million shares of Earth Industrial Plc. The shares were reportedly pledged with the BBC by Suchart Tancharoen, a Chachoengsao MP, and Mr Saxena, against loans borrowed to take over the companies. Sansern Nilrat, a director of Thai Sakura Finance & Securities Co, which presided over yesterday's auction, said the victory by BAM helped it to maintain the value of assets in its portfolio at reasonable levels. BAM had reportedly recovered about 7.2 billion baht from bad debtors of the BBC, and armed with the cash was ready to participate in the auctions to maintain the value of the assets. The collections represented about 12% of the BAM portfolio. However, most of the loans had been borrowed by Mr Rakesh and a number of politicians. After the government decided to close the BBC, the bank's good assets were transferred to Krung Thai Bank, while the bad assets were transferred to BAM. Mr Sansern said BAM would have to seek Securities and Exchange Commission approval to waive public tender offers. Any firm acquiring up to 25% of the shares of any listed company is required to buy shares from small shareholders at the same price. However, BAM is not in a position to do so. According to the Stock Exchange of Thailand, the major shareholders of Indara Insurance Plc, a non-life insurer, include TCC Business Co, a subsidiary of Mr Charoen, holding 14.15%; the defunct First Bangkok City Bank, also once under the control of Mr Charoen, with 10% (transferred to Krung Thai Bank); and BankThai Plc, formerly Union Bank of Bangkok, 6.29%. Indara Insurance Plc reported a net loss of 4.69 million baht in the third quarter of the year. However, it registered a net profit of 3.49 million baht for the first nine months. In a related development, a Canadian judge on Monday set a date to hear closing arguments on the extradition to Thailand of Mr Saxena to face charges of embezzlement. "Let's get it over with," British Columbia Supreme Court Justice Frank Maczko said in Vancouver, as he set aside five days in April to hear the closing arguments. Mr Saxena stands accused of embezzling $2.35 billion from BBC. He has denied the charge, saying he was just a bit player in an elaborate scheme orchestrated by the bank's top executives. Mr Saxena was arrested in June 1996 by Royal Canadian Mounted Police in a British Columbia ski resort. At the time of his arrest, he was carrying the equivalent of $69,000 in various currencies in a briefcase. He was dealt a blow earlier this month when Justice Maczko ruled that witness statements taken by investigators in Bangkok were admissible. Thailand has now asked to have three of those statements revised to correct "minor" factual errors. The judge will rule on that application on Dec 6. A ruling in the case will not end the issue, however. If the court finds enough grounds to extradite Mr Saxena, the case could remain in the Canadian judicial system for years as he appeals to a number of higher provincial and federal courts. (Bangkok Post 24-Nov-1999) BANGKOK METROPOLITAN BANK: Ex-execs face criminal charges --------------------------------------------------------- The Bank of Thailand (BOT) yesterday pressed criminal charges against two former top executives of Bangkok Metropolitan Bank (BMB), alleging that they acted in direct violation of BOT orders in approving financing for a company affiliated with the bank. The central bank ordered a freeze on the assets of the former BMB executives and prohibited them from leaving the country. BOT Assistant Governor Rathakorn Nimwatana, who announced the central bank's action, did not disclose the names of the two individuals. A source told Business Day that criminal complaints were filed with the police, alleging that former BMB President and Vice Chairman of the the Board Vichien Tejapaibul and former BMB Managing Director Panya Tantiyavarong "violated the law on many counts" when loans were made to companies affiliated with BMB and its major shareholders." "A large proportion of the loans made by BMB to firms affiliated with BMB board members and shareholders subsequently became non-performing," Rathakorn said. As a result, the central bank issued an order to BMB in 1995 prohibiting it from making loans to affiliated companies, Rathakorn said, adding that despite the order, BMB provided financing to an affiliated company - Metropolis Trust and Securities - using two promissory notes worth 67 million baht to obtain aval financing. "Since the use of aval amounts to a form of lending, there is a requirement for sufficient collateral or for at least two bank board members to act as guarantors," the BOT assistant governor said. "The BMB executives approved the financing in direct violation of central bank order." The first aval transaction took place between 2-14 November 1997. Subsequently, on June 27, 1997, Metropolis Trust and Securities was ordered closed temporarily and was permanently shut down on December 8, 1997. The holder of the promissory notes to Metropolis Trust and Securities later demanded payments of principal and interest, totalling 73 million baht. Rathakorn said the aval transaction was in violation of the Stock Exchange of Thailand Act, articles 317, 311 and 313, dealing with executives whose actions cause damage to the business entity. In addition, the two former BMB executives were alleged to have violated articles 353 and 354 of the Criminal Code and articles 85 and 91 of the Public Law. Penalties for violating the Commercial Banking Act entail imprisonment of no longer than one year or fines not exceeding 300,000 baht. Violations of Stock Exchange of Thailand Act call for fines of no less than 500,000 baht or no less than twice the amount of damage, and imprisonment of 5-10 years. Meanwhile, the Bank of Thailand said it was proceeding with its investigation of internal lending operations at Krung Thai Bank to determine if laws were violated. Rathakorn said there were indications of illegal activities, adding that further investigation was needed. There has been strong criticisms of the government's delay in investigating KTB for possible criminal violations. Critics charge that Finance Minister Tarrin Nimmanahaeminda was protecting his brother Sirin who was KTB president for seven years, and that the BOT dragged its feet on investigating KTB because BOT Governor M R Chatu Mongol Sonakul was KTB chairman for four years. Prior to filing criminal charges against the two former BMB executives, the central bank took similar action against former Laem Thong Bank (LTB) President Sirichat Voravudhi and 12 Siam City Bank (SCIB) executives, including former SCIB President Som Jatusipitak. (Business Day 24-Nov-1999) PHONGSATHORN FAMILY: Promise to pay debt extinguishes suit ---------------------------------------------------------- Tisco Finance Plc has withdrawn its bankruptcy suit against three members of the Phongsathorn family after they had agreed to repay loans owed to the company in an out-of- court settlement. The Central Bankruptcy Court has approved the withdrawal. The three people named by Tisco as defendants were Sukhum Phongsathorn and his two sons, Phrommintra and Vinai. Their company, BPT Plc, was named as a fourth defendant. In a statement to the court, Tisco Finance said that BPT, which was delisted from the Stock Exchange of Thailand in July last year, had borrowed nine million baht from the company in August 1996, with the three Phongsathorn family members acting as guarantors. After acquiring the money, BPT serviced the loan by paying interest only until November 1996. Tisco said it had told the defendants several times to settle the overdue payments, but they ignored its notices. After Tisco filed the court case, the Phongsathorns hurried to talk with the company, and agreed to pay the debt. Kongchak Phophrom, the judge in the case, said it was encouraging that both sides could settle out of court. "This is in line with the Central Bankruptcy Court's principles. We want both plaintiffs and defendants to compromise," he said. (Bangkok Post 24-Nov-1999) PIZZA PLC: Stock falls on rumors of lost franchise pact ------------------------------------------------------- The foreign board share price of Pizza Plc. dropped nearly 10 percent yesterday as foreign investors unload the share ahead of market rumors that a franchise agreement between Pizza Plc. and its master franchise Tricon would fall through. Analysts contacted by Business Day said the downside potential of the share is half the value it was before the disagreement erupted, or at about 45 baht per share. Even if an agreement is reached, Pizza Plc. would have to pay higher royalties, and devote more resources to Pizza Hut, a maturing brand, analyst said. The company may also have to abandon plans to develop promising brands that come into direct competition with businesses held by Tricon in Thailand. Pizza Hut accounts for about half the income generated by Pizza Plc. Other brands in the Pizza Plc. portfolio are new businesses. Conversion of the Pizza Hut restaurants into other restaurants is not possible said most analysts contacted by Business Day. Rumors that Tricon Global Restaurants, the master franchiser for Pizza Hut has sent a team of managers to Thailand to lay the foundation for operating the Pizza Hut franchise itself, sent the share price lower on the foreign board. Pizza Plc. management declined to comment on the rumors. Tricon was not available for comment. Pizza Plc shares closed near the 73 baht level yesterday on the foreign board, off 7 baht per share for the day on heavy volume of 17,000 shares traded. On the local board the share closed at 76.5 baht with light volume of 3,500 shares traded. The share price stood at 90 baht per share before Tricon placed an advertisement in the Bangkok Post last Wednesday announcing that negotiations between Tricon and the Pizza Plc. had broken down. The advertisement said Tricon was ready to develop the business in Thailand on its own. (Business Day 24-Nov-1999) REGIONAL CONTAINER LINES: Issues debt-slicing debentures -------------------------------------------------------- Regional Container Lines Group, one of the region's largest container feeder operators, is issuing unsecured debentures worth one billion baht, with a maturity period of five years, mainly to pay debts. The debentures will be placed privately in lots of at least 100,000 baht and will carry an annual fixed interest of between 8.375% and 9.125% for the first three years. A floating rate will apply for the final two years based on the minimum lending rate plus 0.75 percentage points. The allotment will be on December 7 with subscription accepted by closing time on December 8. The issue is set for December 9. The private placement will be arranged by Citicorp Finance & Securities (Thailand) and Bangkok Bank. Tasanai Chantarangkul, executive vice-president of RCL, said the money received from the debentures would mainly be used to repay part of its existing debt. The balance would provide working capital and fund expansion. RCL will issue additional debentures worth 400 million baht if the company receives an overwhelming response. "RCL expects to sell the debentures quickly as the interest rate is higher than that on savings at many banks," he said. Mr Tasanai said the debenture issue was expected to reduce the company's debt-to-equity ratio to 1.63:1 this year, from 1.78:1 in 1997. The company expected to repay debts of up to US$170 million within four years. RCL's debts stand at $310 million. RCL's earnings before tax are forecast to reach $59 million this year. The company's net profit for the first nine months this year was $14 million, compared with a profit of $12 million in the last full year. The revenue increase was largely because of a sharp rise in trading volume and demand, particularly in the third quarter this year. Sumate Tanthuwanit, president of RCL, said earlier this month that RCL's seven creditor banks in Singapore had initially agreed to reschedule debts of $220 million maturing between 2000 and 2002. The banks had agreed to reschedule repayment of $120 million by two to four years. For the remaining debt of $100 million, negotiations are continuing. "The debt rescheduling will increase the company's liquidity," Mr Sumate said. RCL was founded 70 years ago and now has registered capital of 50 million baht. Ngow Hock is the company's largest shareholder with a 28.7% stake. The feeder operator owns 26 vessels and operates six charter vessels serving more than 48 locations in 18 countries. The company claims a 25% share of the commercial shipping industry in Thailand. Mr Sumate said the company had no plan to buy additional vessels but would charter ships instead if it needed more capacity. (Bangkok Post 24-Nov-1999) SIAM COMMERCIAL BANK: Restructure completion by year-end -------------------------------------------------------- Siam Commercial Bank (SCB) said it plans to complete restructuring 30 billion baht in debts by the end of the year. If it reaches this goal, the bank would bring the total of restructured debt to 180 billion baht . SCB President Chada Watthanasiritham said by the end of the third quarter, SCB had restructured 156 billion baht of non-performing loans (NPLs), rreducing NPLs from 30 to 24 percent of the total loans. By the end of the last quarter, SCB expects to finalize an additional debt restructuring program of 30 billion baht, bringing NPL down below 24 percent. She said 11 percent of SCB's restructured debts reverted to NPLs, citing borrowers' insolvency. In addition, the bank had new NPLs added to its bad loans account. She also voiced concern over borrowers who intentionally defaulted on their loans and drew negative reactions from foreign investors. (Business Day 24-Nov-1999) THAI OIL CO.: Selling 26% stake in ThaiOil Power in rehab --------------------------------------------------------- PTT Exploration and Production Plc (PTTEP) has struck a US$35.88-million deal to acquire a 26% interest in Thaioil Power, part of the debt-ridden Thaioil Co. PTTEP, the oil and gas exploration arm of the Petroleum Authority of Thailand and Thaioil, the country's largest oil refiner, on Monday signed a memorandum setting out the main terms of the transaction. PTTEP and Thaioil are negotiating a sale and aiming to finalise a deal by early next year, according to PTTEP president Prajya Phinyawat. The deal is subject largely to the successful conclusion of Thaioil's $2.23-billion debt restructuring programme. The majority of just over 120 international creditors recently voted in favour of a restructuring that would cut Thaioil's total debt burden to $1.39 billion. Thaioil Power is one of a host of subsidiaries of Thaioil which went bust a year ago following the plunge in regional and local refining margins, prompted by the jump in refining capacity and a drop in demand for refined products. Thaioil Power owns two major power assets: a 117.5 megawatt small power producer (SPP) plant and a 56% stake in Independent Power (Thailand) Co (IPT), the sponsor of a multi-billion-baht combined cycle complex. Both plants are located adjacent to Thaioil's refinery complex in Sri Racha. The SPP plant has been in operation since April 1998 while the 700-MW IPT power station is still in the commissioning stage. IPT has contracted to sell all of its output to the Electricity Generating Authority of Thailand under a 25- year power purchase agreement. The other shareholders of IPT are Unocal Asia Pacific Venture Ltd (24%) and Siemens Aktiengesellschaft (20%). PTTEP's acquisition of an interest in Thaioil Power is in line with the company's strategy, revealed earlier this year, to diversify into other energy-related businesses away from petroleum exploration and production. PTTEP expects to fund the purchase from internal resources. (Bangkok Post 24-Nov-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. 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