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NEP Realty and Industry Public Company Limited
Information Memorandum of Connected Transactions
Regarding
Gradual Conversion of Debts to Registered Capital of the Company and Loan to Settle Debts
This Information Memorandum is prepared in accordance with the Board of Directors' Meeting of
NEP Realty and Industry Public Company Limited No. 1/2547 held on 30th January 2004, which had the
unanimous resolution to approve the Company to do gradual conversion of debts to registered capital for the
financial institutional creditors. Such gradual conversion of debts to registered capital makes the transaction
to be connected transaction according to the Announcement of the Stock Exchange of Thailand, Subject:
Disclosure of Information and Operation of Registered Companies regarding Connected Transactions,
Year 2003.
1. Transaction Date
Upon receiving approval from the Extraordinary Shareholders' Meeting of the Company No. 1/2547,
which will be held on 4th March 2004.
2. Type of Transaction
On 4th July 2001, The Company has agreed with the conditions of Debt Restructuring Contract in accordance
with the judgment of the Civil Court with NFS Asset Management Company Limited (AMC-NFS) as the
representative of Nation Finance Public Company Limited (NFS). Currently the Company has outstanding
debts amounting to 505.11 million Baht having the condition to grant the right to creditors to do conversion
into ordinary shares of the Company at the price of 10.00 Baht per share. Apart from this, there is outstanding
interests payable amounting to 100.40 million Baht, which AMC-NFS will forgiven such debts if the Company is
able to settle the debts completely within the specified period.
On 30th January 2004, the Company has entered into the Memorandum of Understanding Agreement with
AMC-NFS to amend the conditions due to the payment of debts in the Judgment, by convert accrual interests
to equity amounting to 145.66 million Baht within March 2004. Moreover, the principles 109.00 million Baht
and the interests occur from 1st January 2004 through the conversion date will convert to the equity within
September 2004 (Conversion at 10 Baht per share, total conversion of debts amounting not over 27 million
shares). The AMC-NFS has agreed to hair cut the accrual interest amounting 100.40 million on the Memorandum
of Understanding date, the other debts 250.00 million Baht the Company will borrow form the Thanachart Bank
Public Company Limited (NBANK) (NFS hold the shares in NBANK in portion 98.89 percent of paid up capital) to
pay AMC-NFS. Then the debts restructuring agreement will be completely terminated.
2.1 Status of Debts to be Converted to Capital and Settle Debts as of 30th January 2004
The Company has outstanding debts with NFS Asset Management Company Limited (AMC-NFS) as per the
following details:
Debts of Outstanding Principal that have to be paid according to the Compromise Agreement on 4th July 2001:
Debt of 1st Part Principal319.88million Baht
Debt of 2nd Part Principal 39.57million Baht
Debt of 1st Part Interest145.66million Baht
Total 1st Part Debts505.11million Baht
Debt of 2nd Part Interest, which will be forgiven upon
paying the 1st Part of Debts completely100.40million Baht
Total Debts of Outstanding
Principal and Interest605.51million Baht
Remarks:1.The 1st part principal amount to pay interests for Year 1-4 is equal to 4, 5, 6, and 7 percent
per annum, for Year 5-8 is equal to MLR.
2.The 2nd part principal amount to pay interests for Year 1-4 is equal to 2 percent per annum,
for Year 5-8 is equal to MLR.
3.The 3rd part principal amount will not have interest.
2.2Method of Debt Settlement
Principal / InterestAmount (million Baht)Method Period (within)
Debt of 2nd Part Interest100.40 AMC-NFS will forgive immediate upon January 2004
signing the Contract.
Debt of 1st Part Interest 145.66 Conversion of Debt to Registered March 2004
Capital in the number of 14.57 million
shares at the par value of 10.0 Baht
per share.
Debt of 1st and 2nd Parts 109.00 Conversion of Debt (Principle and September 2004
Principle Interest) to Registered Capital in the
number of approximately 10.90 million
shares at the par value of 10.0 Baht
per share.
Total Amount of Conversion 355.06
Part of Outstanding Debts 250.45 Borrow from NBANK to pay the debt March 2004
Payable
Total Amounts 605.51
Note : conversion of debts amounting not over 27 million shares
2.3Summary of Essential Information of the Company issuing Securities for the purpose of Converting
Debts to Registered Capital
Company Name:NEP Realty and Industry Public Company Limited
Type of Business:Production and Sale of Packaging Products
Type of Business Operation: Production and Sale products made from jute and plastic, such as
jute bags, jute rope/yarn, jutes, jute fibre, and plastic bags. Such products
are mostly used in agricultural industry, by using them to contain agricultural
produces, such as rice, corn, and animal food, etc.
Summary of Financial Status and Operations Result:
Unit: million Baht
Balance Sheet 3rd Quarter, 2003200220012000
Total Current Assets 230.90265.80234.98221.05
Total Assets 1,469.831,440.97 1,342.33 2,175.32
Total Current Liabilities 268.89268.98120.52 1,066.53
Total Liabilities under 701.45743.45917.58 0.00
debt restructuring agreements
Total Liabilities 975.641,020.81 1,045.90 1,958.08
Issued and Fully Paid1,051.881,004.11 1,000.00 1,000.00
Cumulative Profit (Loss) (928.99)(981.10) (1,093.57) (1,956.01)
Total Shareholders' Equity 494.19420.16 296.43 217.24
Income Statement
Total Revenue469.08668.44648.55655.37
Cost of Goods Sold329.38451.09418.04397.18
Gross Profit 72.15101.75114.34116.32
Sales and Operating Expends 62.5099.8076.5684.73
Total Expends393.62553.15661.25685.94
Interests Payable(25.03)(34.22)(43.39)(139.57)
Net Profit (Loss) before
Extraordinary Item50.4381.07(56.08)(170.13)
Extraordinary Item - Gain
from Debt Restructure 027.23133.5527.84
Net Profit (Loss) 50.43108.3077.46(142.30)
2.4Summary of Essential Information of the Loan from Thanachart Bank Public Company Limited
to Settle Part of Debts
Type:Term Loan Refinance
Amount:250.00 million Baht
Period:8 years
Interest Rate:Year 1-2, stable at 5.0 percent per annum
From Year 3 onwards, MLR is applied (The current MLR of NFS is equal to 5.75 percent per annum)
Payment of Principals:Pay every 3 months, altogether 32 installments. Beginning on the
third month from the Month that the Company borrows.
Installment 1-8, at 6.00 million Baht per installment
Installment 9-27, at 8.00 million Baht per installment
Installment 28-32, at 10.00 million bath per installment
Payment of Interests:Pay every end of month
Collaterals:Mortgage a plot of land (77-1-83 rais) along with the factory building located
at 3 Suranarai Road, Jorhor Sub-district, Muang District, Nakorn Ratchasima Province
(The appraisal prices done by Thopthawee Appraisal and Service Company Limited on May 2002 having the
value of 368.096 million Baht.)
Pledge Amount:300 million Baht
Other Conditions/:None
Limitations
3.Total Remuneration Value
Debt of interests to be forgiven100.40 million Baht
Debt of interests to convert into capital immediately145.66 million Baht
Debt of principals to do gradual conversion within 6 months (approximately) 109.00 million Baht
Total Debts Amount355.06 million Baht
Number of newly issued shares to serve
the conversion of debts (approximately)25.47 million shares
Value per share as if to be sold to settle debts13.94 Baht
Par Value Per Share 10.00 Baht
Market value per share, average 30 days prior
to the Board of Directors' meeting9.29 Baht
4.Name of Connected Persons (as of 31st December 2003)
4.1 Name of Directors and Major Shareholders
4.1.1 NEP Realty and Industry Public Company Limited
Board of Directors
1.Gen. AkaradejSasiprapha
2.Gen. ChainarongNoonpakdee
3.Gen. BoonlertKaewprasit
4.Gen. VisitAchkhumwong
5.Gen. NipatPunyaratabandhu
6.Mr. Samuel Peter Shuler
7.Mr. PrasitPlitvanont
8.Mr. PiyabhanNimmanhaemin
9.Mr. NarongPhaholvech
10.Mrs. LeenaCharernsri
11.Mr. PongpunBuranasiri
12.Mr. NipitArunvongse Na Ayudhya
13.Mr. NisanPrathanrasnikorn
14.Gen. NaruenartKampanartsaenyakorn
Major Shareholders (as of 14th October 2003)
1. Ministry of Finance held 28.13 percent of paid-up capital amounting to 1,051.88 million Baht.
2. Group of Mr. Phornsake Karnjanajari held 26.61 percent of paid-up capital amounting to 1,051.88 million Baht.
Remarks:Group of Mr. Phornsake Karnjanajari consists of:
1. Mr. Phornsake Karnjanajari held 22.77 percent of paid-up capital.
2. Miss. Chawee Siwapruek held 3.84 percent of paid-up capital.
4.1.2 NFS Asset Management Company Limited
Board of Directors
1.Mr. ThaweesakSaksirilarp
2.Mr. MongkolPienpitakkij
3.Mr. WutthilertSuwansri
4.Mr. HatchaphongPhokai
5.Mr. CharanSuthirat
6.Mr. SuraphongWipulphong
7.Mr. WatcharaPermpitak
8.Mrs. KrissayaneeRattanachaicharn
Major Shareholders (as of 30th April 2003)
Nation Finance Public Company Limited held 100.00 percent of paid-up capital, which was equal to 1,000.00
million Baht.
4.1.3 Thanachart Bank Public Company Limited
Board of Directors
1.Mr. BanthergTantiwit
2.Mrs. OranuchOsathanond
3.Mr. KiattisakMeecharoen
4.Mr. NarongJiwangkool
5.Mr. SuwitArunanonchai
6.Mr. ChaiyapatSriwisarnwacha
7.Mr. RujSapnirun
8.Miss SuwannaSuwanpratheep
9.Mr. PiyaphongArjmangkorn
10.Mrs. NusaraRunsamran
11.Mr. PakitEamopas
Major Shareholders (as of 8th April 2003)
Nation Finance Public Company Limited held 98.89 percent of paid-up capital, which was equal to 8,101.00
million Baht.
4.2 Connected Persons
The Company is not a major shareholder, does not take part in business operation, and
does not have any authority to control NBANK and AMC-NFS. (NFS holds shares in NBANK in the proportion
of 98.89 percent of paid-up capital, and NFS holds shares in AMC-NFS in the proportion of 100.00 percent of
paid-up capital amounting to 1,000.00 million Baht.)
NBANK and AMC-NFS are not major shareholders, do not take part in business operation,
and do not have any authority to control the Company.
However, since the conversion of debts to capital of AMC-NFS is a gradual conversion of
debts to capital, by which the first conversion of debts to capital (debts amounting to 145.66 million Baht to be
ordinary shares in the number of 14.57 million shares) will make AMC-NFS become a major shareholder of the
Company immediately, by holding shares in the proportion of 12.06 percent of registered capital. Hence, the
transaction that the Company borrows the money from NBANK amounting to 250.00 million Baht in order to
settle debts to AMC-NFS, and the transaction that AMC-NFS will do gradual conversion of debts to registered
capital in the future approximately amounting to 109.00 million Baht to be ordinary shares in the approximately
number of 10.90 million shares, these will be considered connected transactions according to the
Announcement of the Stock Exchange of Thailand, Subject: Disclosure of Information and Operation of
Registered Companies regarding Connected Transactions, Year 2003, dated 19th November 2003. As a result,
the number of shares and shareholding proportion of AMC-NFS in the Company are stated below:
TransactionsIncreased Capital Registered Capital Shareholding of AMC-NFS
(million shares) (million shares) Number %
(million shares)
Paid-up Capital as of 31st -106.24- -
December 2003
First Conversion of Interest 14.57120.81 14.57 12.06
to Capital
Gradual Conversion of Debts 10.90131.71 25.47 19.34
to Capital on September 2004
AMC-NFS does the gradual conversion of debts to registered capital because they want to avoid the
effect that might occur to the market price of ordinary shares from the conversion to registered capital for huge
amount. And for such conversion of debts, AMC-NFS will do the conversion of debts by using the debts of
interest to do the conversion first. Generally, the asset management business will solve the problem and
manage the debts in the part of interest to complete before the principal.
5.Characteristic Conflict of Interest of Connected Persons
After the first conversion of debts of interest, AMC-NFS and/or NFS and/or NBANK will become major
shareholders of the Company, which will make them have conflict of interest in the transaction of doing the
gradual conversion of debts, and the lending of money to pay debts. Hence, AMC-NFS, NFS, and NBANK as
well as the concerned persons do not have voting rights in the shareholders' meetings regarding such issues.
For doing such transactions, the Company must receive approval from the shareholders' meeting to
proceed the conversion of debts to registered capital and borrow the money to settle debts because these two
transactions are continuous and connected transactions. Thus, the Company must receive a resolution from
the shareholders' meeting approving to do such connected transactions with the votes of not less than third in
fourth of total votes of shareholders attending the meeting and having voting rights, without counting the
shareholders who have interest in such transactions.
6.Directors who Have Interest do not Attend the Meetings
AMC-NFS, NFS, and NBANK do not have co-directors. Thus, there are no directors who have interest,
and/or directors who are connected persons. Apart from this, the meetings of the Board of Directors of AMC-NFS,
NFS, and NBANK do not have any directors who have interests or connected as mentioned above to attend the
meetings or exercise the votes.
7.Summary of Comments of the Board of Directors and Audit Committee
The Company has agreed with the conditions of Debt Restructuring Contract in accordance with the
judgment of the Civil Court dated 4th July 2001. Thus, this conversion of debt to registered capital of AMC-NFS
is considered the execution of transactions according to the principles and conditions being agreed according
to normal commercial business, and the Company could not avoid such matter. Apart from this, such conversion
of debts to capital is according to the principles that the shareholders' meeting of the Company has previously
approved the issues.
The conversion of debts to registered capital at the price of 10.00 Baht per share is higher than
the market price average 30 days prior to the Board of Directors' meeting, which is equal to 9.29 Baht per
share, and higher than the book value, which is equal to 4.70 Baht per share according to the financial
statements recently audited by the auditor of the Company as of 30th September 2003, and is the value
that is not less than the par value, which is 10.00 Baht per share. Thus, the conversion price at 10.00 Baht
per share is a fair price and gives utmost benefit to the Company.
The loan amount received from NFS is the loan that has principles and conditions according to the
normal commercial business, by which such loan has longer payment terms and lower interest rates than before.
Such conditions are the conditions for borrowings that the Company can borrow from other financial institutions
in general. Thus, it does not give any benefit to the persons who have conflict of interest.
As a result, the execution of these two transactions are reasonable and give the most benefit to the
Company not less than the execution of the transactions with independent outsiders.
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