/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/000107.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 Friday, January 7, 2000, Vol. 3, No. 5 Headlines * C H I N A & H O N G K O N G * MIGHTY CLOTHING CO. LTD.: Facing winding up petition * I N D O N E S I A * BANK INDONESIA: Gov't assures aid in liquidity crisis BANK INDONESIA: Bank chief may be forced out BANK INDONESIA: President asks House to replace BI governor PT BIMANTARA CITRA: Reaches debt agreement with IBRA PT PAITON: Audit ties Suharto family to co. corruption PT SURYAMAS DUTAMAKMUR: Loses derivative suit PT TIRTAMAS COMEXINDO: Hashim criticizes bankruptcy action * K O R E A * DAEWOO GROUP: Bad-debt agency to buy Daewoo bonds DAEWOO GROUP: Public bailout approaching W100 Tril. DAEWOO MOTOR CO.: Creditors to sell off by end of June HYUNDAI GROUP: Park Sae-yong scapegoat of power struggle? SAMSUNG MOTOR CO.: Wants acquisition done by end of March * M A L A Y S I A * TIME ENGINEERING BHD: Rejects offers, to go it alone * P H I L I P P I N E S * AMALGATED SECURITIES CORP.: SEC rejects FEBTC acquisition NATIONAL STEEL CORP.: PNB may condone its debt NATIONAL STEEL CORP.: Enrile seeks Senate probe of NSC deal SHEMBERG MARKETING CORP.: To make debt-for-asset swap SOLID BANK CORP.: SEC sets new hearing * T H A I L A N D * SAHAVIRIYA OA PLC: Realigns 14 subsidiaries into 4 units THAI PETROCHEMICAL INDUSTRY: Recapitalization ahead THAI TELEPHONE & TEL.: Clarifies debt restructure for SET ============================== C H I N A & H O N G K O N G ============================== MIGHTY CLOTHING CO.LTD.: Facing winding up petition --------------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance has scheduled a hearing for January 26 on the petition of Wong Wing Sze for the winding up of Mighty Clothing Company Limited. A notice of legal appearance must be filed on or before January 25. ================= I N D O N E S I A ================= BANK INDONESIA: Gov't assures aid in liquidity crisis ----------------------------------------------------- The Indonesian government will fully support Bank Indonesia in the event of a liquidity crunch, Senior Economics Minister Kwik Kian Gie said. "The government has the obligation to help the central bank with any problem it has been facing, he said. A state audit recently revealed Bank Indonesia was near insolvency and had mishandled around 51 trillion rupiah ($7.09 billion) of government money channeled into ailing banks in 1997 and 1998. Bank Indonesia Governor Sjahril Sabirin said Sunday the bank won't have a problem honoring its obligations, while Finance Minister Bambang Sudibyo has said the government would recapitalize the bank if it lacked equity. Meanwhile, the news that the central bank may be technically bankrupt may delay critical talks on Indonesia's official debt, said Takahira Ogawa, sovereign analyst at Standard & Poor's Corp. in Singapore. The International Monetary Fund, which is leading a massive bailout for Indonesia, on Monday called on the central bank to adopt "corrective" measures. The IMF said the corrective steps would be included in a letter of intent to be signed this month. That would clear the way for fresh loans from the IMF and other multilateral agencies. It would also open the door for new debt talks with the Paris Club, the group of foreign creditor governments that usually acts only after a country has signed up under an IMF or World Bank program. "If (the Bank Indonesia scandal) will affect the lending stance of the IMF/World Bank . . . that's going to affect the timing of the Paris Club talks," said S&P's Mr. Ogawa. S&P will be monitoring closely any progress or delay in the Paris Club talks, which are scheduled to begin in late January or early February, he said. Indonesia's foreign debt totals 110% of gross domestic product. The country is heavily independent on foreign assistance. Indonesia has already rescheduled a first round of Paris Club debt, which kept debt repayments to $2 billion, but only for the current year ending March 31, 2000. Foreign debt repayments are expected to soar to about $5 billion in 2000, and $9 billion a year in 2001 and 2002. Progress in the IMF and subsequent Paris Club debt talks is more important to Indonesia's finances than specific questions over Bank Indonesia's technical solvency, because a successful conclusion will open the door to new funds, said Mr. Ogawa. (The Asian Wall Street Journal 05-Jan- 2000) BANK INDONESIA: Bank chief may be forced out -------------------------------------------- Indonesian President Abdurrahman Wahid is considering firing the central bank governor after the release of an audit suggesting that Bank Indonesia may be technically bankrupt, a senior parliamentarian said on Wednesday. "Considering the current situation in BI (Bank Indonesia), the president has proposed that the BI governor be replaced," Akbar Tanjung, speaker of the country's lower house of parliament, the People's Representative Council (DPR), said. Mr Wahid was not immediately available for comment. But the move comes amid growing speculation that he is planning a cabinet reshuffle and an overhaul of the bureaucracy to clean out figures implicated in corrupt business dealings under past governments. Any attempt to fire Sjahril Sabirin, the central bank governor, will also be the first significant test of Indonesia's central bank since it was transformed into an independent monetary institution last May. Mr Tanjung said that while the parliament agreed with Mr Wahid's request, it wanted to delay action until after a second audit to investigate whether there was any wrongdoing on the part of the governor. Under the new central bank law, a governor can only be removed with the approval of the parliament if, among other things, there is evidence of corruption or wrongdoing on his part. Mr Tanjung said parliament wanted the investigative audit to be completed by the end of March. It was also demanding the government conduct a separate evaluation to determine the central bank's true financial position, including how much money would be needed to recapitalise it. The original audit, details of which were released last Friday, was conducted by a government agency, the Supreme Audit Board, helped by international consultancy KPMG. While details of many of its findings remain sketchy, the board said it identified widespread problems in the central bank's bookkeeping, including its treatment of about Rp51,000bn ($7bn) which was injected into the banking system two years ago during the country's financial crisis. The money was intended to stem runs on deposits in the commercial and state banks. However, much of it is believed to have been lost abroad in the form of capital flight. The board has said there were also indications of losses over and beyond this amount. (Financial Times 06-Jan-2000) BANK INDONESIA: President asks House to replace BI governor ----------------------------------------------------------- President Abdurrahman Wahid has asked the House of Representatives to replace Bank Indonesia (BI) Governor Sjahril Sabirin following the disclosure of the damning audit report on the central bank, House Speaker Akbar Tandjung said on Wednesday. "Considering the current situation at BI, the President has proposed that the BI governor be replaced," Akbar told journalists at the House. Akbar, however, said that the House would rather wait until the Supreme Audit Agency (BPK) completes its investigative audit on the central bank to determine if there is malfeasance. "It's true that the plan is there, but the House has to refer to the law, which stipulates that the replacement of the BI governor is only permitted if, among other things, there are indications of banking crimes." Sjahril separately said that he had no problem with the government and House's plan to remove him. "It's all right. We stay calm here." The fate of Sjahril, Akbar said, should depend on the results of BPK's investigative audit, which should be completed by March 31. BPK's investigative audit is to follow up on the results of its general audit on Bank Indonesia's balance sheet of May 17 -- the date when the central bank became independent of the government. The agency tagged a "disclaimer" or "no opinion" label on its audit of Bank Indonesia because of serious weaknesses in the central bank's internal control. The results of BPK's general audit on Bank Indonesia's balance sheet of May 17 indicated the central bank's books were in the red and that it needed recapitalization. Minister of Finance Bambang Sudibyo said on Tuesday that the government was committed to recapitalizing Bank Indonesia, no matter what the cost, and to ensure a minimum capital of Rp 2 trillion (US$285 million). The cost of recapitalizing Bank Indonesia would be equal to the central bank's negative equity plus the Rp 2 trillion capital, Bambang said. Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said on Wednesday that the recapitalization of Bank Indonesia would not burden the government's budget as the government would issue bonds to recapitalize the central bank. "Does the audit on BI have any implication on the state budget? Not at all. The international societies know that the audit on BI does not affect BI's solvability and liquidity." Akbar said the House would support the government's recapitalization of Bank Indonesia and would ask BPK to conduct due diligence on the central bank to determine the true status of its books. "The general audit on BI by BPK must be followed up by an investigative audit to find out details of several issues including BI's emergency liquidity support and equity status," he said. Akbar also called on the Attorney General's Office to conduct a thorough investigation into the alleged irregularities in the central bank. "The Attorney General's Office should follow it up in court if it finds any irregularities in Bank Indonesia," he said, adding the House would also ask the government to follow up the audit agency's findings on the central bank. Asked whether the House would propose a reshuffle in the central bank's board of governors, Akbar said that would depend on the Attorney General's Office's investigation into the alleged irregularities. "If irregularities are found, they should be processed in court. According to law, the House has the authority to propose a reshuffle of the central bank's governor, deputy governor and directors if crimes are found," he said. (The Jakarta Post 06-Jan-2000) PT BIMANTARA CITRA: Reaches debt agreement with IBRA ---------------------------------------------------- The Indonesian Bank Restructuring Agency has reached a debt-to-equity agreement with PT Bimantara Citra, a company owed by a son of former President Suharto, to restructure its $23.1 million debt. Ronald Sinaga, one of the group heads of IBRA's loan- restructuring division, said the debt-restructuring agreement will enable the agency to take stakes in two of Bimantara Citra's units. IBRA will get a 25% stake in PT Plaza Indonesia Realty and a 13.8% share in PT Plaza Nusantara Realty. A memorandum of understanding regarding the restructuring will be signed next week, Mr. Sinaga said. IBRA is Bimantara Citra's majority creditor. The company has a total debt of $45 million. Bimantara Citra is one of 18 companies under the Bimantara group, which is owned by Bambang Trihatmodjo, the middle son of former President Suharto. Mr. Sinaga said the total debt of Bimantara group is 3.4 trillion rupiah (472.6 million) and $275 million, out of which is 1.5 trillion rupiah is owed to IBRA. About 1.4 trillion rupiah of Bimantara's debt to IBRA was personally guaranteed by Mr. Bambang, Mr. Sinaga said. Meanwhile, IBRA expects to launch the Bank Bali rights issue by the end of the month, said the agency's deputy chairman, Farid Harianto. Speaking to reporters at a news conference, Mr. Farid said IBRA Chairman Glenn Yusuf had met with President Abdurrahman Wahid, who expressed his wish to see a speedy execution of the long-delayed Bank Bali rights issue. Mr. Wahid "wants the recapitalization of Bank Bali to be done at full speed," Mr. Farid said. The rights issue is the first step in the government- sponsored bank-recapitalization program, under which the government will act as the standby buyer in the rights issue. The rights issue was initially scheduled for October, but the outbreak of the Bank Bali scandal prompted IBRA to delay the issue to early January. However, the rights issue again hit a snag as the Capital Markets Supervisory Agency, which oversees all stock-market activities, refused to approve the issue pending clarification of the bank's ownership. Since IBRA won't likely get the supervisory agency's approval in time for an early January rights issue, the issue is expected to be delayed further. Mr. Farid warned that if the rights issue isn't done by the end of the January, IBRA has to conduct another due diligence to reassess the cost of recapitalizing Bank Bali. The local bank suffers from a negative interest spread and loses about 30 billion rupiah a month, Mr. Farid said. The cost of restoring Bank Bali's capital base is estimated at 4.1 trillion rupiah. Under the latest recapitalization plan, the government will buy the unsubscribed shares after the rights issue. It will then offer the shares to interested investors through an open bidding process. Mr. Farid said no preferential treatment will be given to any parties, including Standard Chartered Bank. The British bank initially signed an investment agreement with IBRA to buy up to 20% of Bank Bali after the rights issue, and another contract to manage the bank in the run-up to the rights issue. The agreements were scrapped last month following strong opposition from Bank Bali staff, who alleged that the agreements were drawn up in a nontransparent manner, which disadvantaged the bank's previous owners. Separately, IBRA said three investors are interested in buying a stake in PT Bank Niaga to help recapitalize the listed bank. Mr. Farid said two of the potential investors are foreign companies and the other one is "linked to a local company." The agency will open bidding for the Bank Niaga stake next week, said Mr. Farid. He didn't give a specific date. The government plans to recapitalize Bank Niaga to bring the bank's capital-adequacy ratio to 4%. The total cost of recapitalizing the bank is around seven trillion rupiah. Mr Farid said IBRA may have to merge Bank Niaga with PT Bank Danamon Indonesia if the agency fails to find investors for Bank Niaga. (The Asian Wall Street Journal 05-Jan-2000) PT PAITON: Audit ties Suharto family to co. corruption ------------------------------------------------------ A government audit alleges a consortium of foreign companies paid bribes and inflated costs in the development of a multibillion-dollar power project, the most serious charges levied to date against multinationals that partnered with former Indonesian President Suharto's family. The foreign-led consortium, which comprises units of Edison Mission Energy Co. and General Electric Co. of the U.S., as well as Mitsui & Co. of Japan, denied the charges and said it is seeking the publication of its development costs to support its claims. The group also said that it recognizes "a new approach to issues" is needed in developing the power plant now that a popularly elected leader has succeeded Mr. Suharto. The consortium entered Indonesia in 1991 to develop the 1,230-megawatt Paiton 1 coal-fired plant on the eastern end of Java. The group's Indonesian partner is Hashim Djojohadikusumo, the brother-in-law of Mr. Suharto's jiddle daughter, Siti Hediati Prabowo, who herself holds a stake in the project. The fact that Mr. Hashim's company never paid cash for its stake in the project has raised charges of impropriety. The Edison-led consortium, PT Paiton Energy Corp. said Mr. Hashim's company eventually will pay out of the power plant's future earnings. Indonesia's state-owned electricity producer, PT Perusahaan Listrik Negara, defaulted on payments to Paiton Energy last year and sued Paiton to invalidate the contract on what PLN said were grounds of "corruption, collusion and nepotism." Although the suit was dropped, the government's audit charges that the company's links to the former First Family influenced the price structure of the contract. The audit contends there were "inappropriate payments . . . to certain people who had the authority to make decisions" about the development of Paiton 1. The bribery allegation, the audit said, was based on the audit team's discovery of what it said were more than $22 million in unspecified development costs in Paiton Energy's 1994 financial statement. The report states that the sum represented more than 50% of the company's total assets. Paiton Energy said the charge is "erroneous" and ignores a detailed accounting of development costs provided to the auditing body in November. The information included the consortium's payments to international banks, engineering and law firms and other "reputable" companies, Paiton Energy said. The consortium is calling for Indonesia's auditing agency to make public the information "for full and fair consideration." The government audit also says the total cost of the Paiton 1 project was "marked up" by as much as $600 million because of inflated estimates for fuel, construction, engineering and transportation. As a benchmark, auditors used the development costs of PLN's own 1,200-megawatt power plant. The audit estimates that Paiton 1's costs related to permanent housing, construction facilities and management were overestimated by 50%. The audit also charges that Paiton's exclusive coal- purchase contract with another of Mr. Hashim's companies, PT Adaro, was inappropriate, The audit cites high estimates of costs for coal stock, shipment and storage. Paiton Energy said the costs of the project were agreed upon after extensive negotiations with the Indonesian government and that they accurately reflect the project's value and the "risks assumed by the private investors." The company added that agencies of the U.S. and Japanese governments, as well as a number of top international advisers, had validated the price structure. The company said the choice of Adaro as the coal supplier reflected the Indonesian government's demands for domestic, low-sulfur fuel. The price Mr. Hashim's company charged for coal reflected accurate "costs related to purchases, transportation and storage," Paiton Energy said. Ultimately, the government auditors fucosed on Mr. Suharto, charging he and a number of key bureaucrats tailored the Paiton project to its investors. The audit report says on open bidding was held to allow other groups to vie for the project, a move that auditors argue might have lowred the costs. The report also says decrees issued by Mr. Suharto specifically benefited Paiton Energy. The audit recommends Indonesia's Attorney General's office investigate Mr. Suharto and 13 other senior officials connected with Paiton Energy, including two former ministers of mines and energy, Ginandjar Kartasasmita and I.B. Sudjana. A lawyer for Mr. Suharto said Tuesday that Paiton Energy's development was consistent with Indonesia's state policy and that any charges of corruption "must be proven through judicial review." Attempts to reach both Mr. Ginandjar and Mr. Sudjana were unsuccessful, though both men have denied any wrongdoing in past interviews. President Abdurrahman Wahid's government has vowed to renegotiate power purchase agreements with Paiton Energy and 26 other independent power producers who have had their projects disrupted by Indonesia's economic crisis. Indeed, the audit recommends that the price Paiton Energy is charging PLN for its power should be reduced as part of a new agreement. Paiton Energy said it isn't ruling out a price reduction. But it is unclear how the Indonesian government's audit will affect the contract negotiations. The minister in charge of the negotiations, Kwik Kian Gie, said that it remains to be seen whether the auditors followed international norms. Some people involved in the negotiations say an independent auditor will probably be needed to offer another assessment on the costs of the power project. (The Asian Wall Street Journal 05-Jan-2000) PT SURYAMAS DUTAMAKMUR: Loses derivative suit --------------------------------------------- PT Suryamas Dutamakmur lost its legal battle with Bank Niaga when the Supreme Court upheld the bank's appeal and annulled an earlier verdict favoring the property developer, a source at the Supreme Court said. The source said the verdict, dated Dec. 17, annulled the Jakarta State Administrative High Court's decision ordering the bank to compensate Suryamas Dutamakmur in the amount of Rp 290 billion (US$41.5 million) for a derivative transaction. The Supreme Court ruled the transaction between Bank Niaga and Suryamas Dutamakmur was valid under existing laws and must be honored by both parties. The verdict was reached by a three-member panel of justices led by Chief Justice Sarwata. The panel also included Paulus Lotulong and Syafeudin. Bank Niaga president Ruddy Capelle said he had heard about the Supreme Court's decision but had not yet received a copy of the verdict. "The party that is right has finally won victory," Ruddy said commenting on the verdict. He also said justice in the Niaga-Suryamas case was finally reached through the Supreme Court. Lawyers familiar with the case said the Supreme Court's verdict would be a "landmark decision" for other derivative cases. There are currently eight derivative cases working their way through the South Jakarta District Court. The dispute between Niaga and Suryamas began in 1997 when the property developer applied for a derivative transaction from Bank Niaga to develop the Rancamaya housing complex in Bogor, West Java, and the Bumi Manggala housing complex in Cibubur, East Jakarta. The derivative transaction was a cross-currency interest rate agreement in which the two parties swapped their obligations, one in rupiah and the other in U.S. dollars. Under the agreement, Suryamas was to deliver to Bank Niaga a principal amount of $50 million while Bank Niaga, in return, was to deliver an amount of rupiah equivalent to $50 million at the predetermined exchange rate of around Rp 2,500 per dollar. When the rupiah plunged against the greenback following the economic crisis, Suryamas claimed Bank Niaga had entrapped it an "exotic" banking transaction without providing it adequate counsel. Suryamas filed suit against Bank Niaga with the South Jakarta District Court in July 1998. The court ruled in favor of Suryamas and ordered Bank Niaga to compensate the property developer. Bank Niaga filed an appeal with the Jakarta State Administrative High Court. The bank argued that the derivative transaction was a normal banking transaction and that Suryamas itself had admitted to the $50 million obligation to Bank Niaga in its audited financial statements on Dec. 31, 1997, and Dec. 31, 1998. However, the high court in April last year sustained the lower court's decision. Bank Niaga continued its legal battle by filing an appeal to the Supreme Court. Then the case took a sudden turn. According to Ruddy, Suryamas in October asked Bank Niaga to drop its appeal to the Supreme Court and discuss an out-of-court settlement. Bank Niaga rejected the offer, expecting to win the legal battle and also assuming that Suryamas' offer was an "empty" one, Ruddy said. "There was not enough explanation about the reasons, compromises and consequences of the offer," he said. Another source said the Indonesian Bank Restructuring Agency (IBRA) intervened in the Suryamas-Niaga case, attempting to persuade Bank Niaga to accept Suryamas' offer. IBRA took over the private commercial bank when Niaga's shareholders could not save the bank from insolvency following a run by depositors. Ruddy however declined to comment when asked about any intervention by IBRA in the case. "I have no comment on that," he said, adding only that his bank rejected Suryamas' offer on a very sound basis. Ruddy said Bank Niaga had a similar derivative case with property firm Jakarta International Hotel Development. "They offered us an out-of-court-settlement with complete and fair terms and conditions, what may be called a peace accord," he said. Ruddy said based on this so-called peace accord, Bank Niaga agreed to the out-of-court settlement after receiving ownership of a 1.5-hectare piece of property located in Jakarta's Central Business District. (The Jakarta Post 06- Jan-2000) PT TIRTAMAS COMEXINDO: Hashim criticizes bankruptcy action ---------------------------------------------------------- The president of trading firm PT Tirtamas Comexindo, Hashim S. Djojohadikusumo, expressed on Wednesday regret over the Indonesian Bank Restructuring Agency's (IBRA) bankruptcy suit against the company, calling it a "precipitous action." Hashim called on IBRA to withdraw the suit, noting his company was very much willing to resolve the matter. "It is the express intention of PT Tirtamas Comexindo that a comprehensive settlement be concluded with IBRA and that IBRA would therefore see fit to withdraw the lawsuit," he said in a statement. He said the company had not expected a bankruptcy suit would be filed since IBRA had stated in its initial directive that a cooperative settlement with Tirtamas Comexindo should be completed by the end of January 2000. Hashim added that Tirtamas had been preparing a mutually agreeable solution based on IBRA's initial directive. IBRA filed a bankruptcy suit against Tirtamas with the Jakarta Commercial Court on Dec. 30, 1999. The suit was filed on behalf of closed down Bank Tamara, which had claims against Tirtamas amounting to Rp 38 billion (US$5.42 million), including unpaid interest payments and penalties. The loans matured in August last year. Head of IBRA's legal division Agustus Sani Nugroho earlier said Tirtamas's debts to Bank Tamara were only a portion of the firm's bad debts to several banks currently under the control of IBRA. Nugroho said Tirtamas had bad debts totaling $95.7 million and Rp 69.7 billion. Tirtamas was uncooperative toward efforts to settle the debts, he said. Nugroho added that the value of assets recovered from Tirtamas might be much less than the firm's debts because IBRA had mostly obtained only personal guarantees from Hashim. One guarantee is nine million shares of PT Semen Cibinong, which belong to Hashim's Tirtamas Group. (The Jakarta Post 06-Jan-2000) ========= K O R E A ========= DAEWOO GROUP: Bad-debt agency to buy Daewoo bonds ------------------------------------------------- Korea Asset Management Corp. will buy Daewoo Group debt worth a nominal 18.6 trillion won ($16.57 billion) from the nation's ailing investment trust companies, South Korea's bad-debt liquidation agency said. Kamco, the government agency responsible for cleaning up the country's ailing banks, will buy the unsecured Daewoo bonds as early as late January to increase the cash liquidity of trust firms, among the group's main creditors. Public concern about trust company exposure to Daewoo has been widespread, and the purchase should help trust companies meet any rise in redemptions. Daewoo is struggling to emerge from under its $73 billion load of debt. The country's top financial supervisor will try to revive stalled talks on the restructuring the group's debt. Lee Hun Jae, chairman of the Financial Supervisory Commission, will check progress of debt rescheduling for 10 of Daewoo's biggest units with local lenders, starting Thursday with Cho Hung Bank, which is overseeing Ssangyong Motor Co. plans. The commission made no comment on how Mr. Lee's discussions with Korean banks would affect talks with foreign creditors. (The International Herald Tribune 06-Jan-2000) DAEWOO GROUP: Public bailout approaching W100 Tril. --------------------------------------------------- The amount of public funds injected towards the restructuring of the nation's financial sector amounted to W78.5 trillion in the two year period between the onset of the financial crisis at the tail of 1997 and the end of last year. It is expected that this amount will snowball to about W100 trillion when the government injects additional public funds to deal with Daewoo Business Group-issued bonds. According to a joint statement issued by the Financial Supervisory Commission (FSC), Korea Deposit Investment Corp. (KDIC), and Korea Asset Management Corp. (KAMCO) on Wednesday, the KDIC invested a total of W50.38 trillion, KAMCO invested W22.77 trillion, and the government an additional W5.4 trillion towards restructuring efforts. KDIC, the state-run insurer for bank deposits, explained that it raised its funds through the issuance of bonds in an amount of W43.5 trillion, an IBRD-ADB loan of W1.42 trillion, and borrowings of W4.99 trillion from financial organizations. These funds were completely depleted by the end of 1999. KDIC said it injected a total of W20.03 trillion to five commercial banks, W3.56 trillion to purchase non-performing assets of Korea First Bank, W11.16 trillion to buy in bad assets from liquidated banks, W14.85 trillion in payments of deposits. KAMCO said it raised W21.57 trillion through the issuance of W20.5 trillion in bonds, W573 billion in investment from banking organizations, and a W500 billion loan from Korea Development Bank. KAMCO explained it used W6.067 trillion to buy non-performing loans from Korea First and Seoul Bank, and W9.066 trillion to buy non-performing loans at 23 local banks. KAMCO further said that it has been selling off non-performing loans and reinvesting income from sales to purchase more non-performing loans. In addition to KDIC and KAMCO's expenditures, the government directly raised a total of W5.4 trillion from various state-run funds. The government also made an in- kind investment of W1.5 trillion to Korea First and Seoul Bank and W3 trillion for Korea Life Insurance and Daehan Investment Trust. Forthcoming injections of public funds this year are estimated to be W10 trillion to cover Daewoo-issued corporate bonds. KAMCO has already taken steps to purchase a total of W18.6 trillion in Daewoo-issued bonds from investment trust firms. The government will also be required to make additional injections to buy in large non- performing loans from the banking industry as local banks will be introducing more stringent criteria in evaluating their assets. One government official said even W20 trillion in public funds would barely be sufficient to cover Daewoo-issued bonds and non-performing loans at the banks. (Digital Chosun 05-Jan-2000) DAEWOO MOTOR CO.: Creditors to sell off by end of June ------------------------------------------------------ Creditors of South Korea's Daewoo Motor Co Ltd said Wednesday they plan to sell off the country's second largest automaker within six months, as a delegation of Ford Motor Co arrived to sound out acquisition terms. "We need to sell it off at the earliest possible date to preserve its asset value and minimize the burden on tax payers," a spokesman of Korea Development Bank (KDB) said. "The sale of Daewoo Motor will be carried out under principles of enhancing competition in the market, treating foreign and domestic bidders equally, putting Daewoo Motor on a normal track at the earliest possible date and maximizing its asset value," he said. The other principles include maintaining transparency throughout the auction procedure and "taking into account the overall macroeconomic situation," he told reporters. Financial authorities and creditors put Daewoo Motor up for auction only with select bidders instead of holding an open bidding, in hopes of a speedy sell-off. The creditors will receive letters of intent from bidders for Daewoo Motor by the end of this month, accept proposals by early March and select a bidder which offers the most favorable terms by mid-March, he said. "We plan to sign the final contract and receive the payment by the end of June," he said. He also confirmed that representatives of Ford Motor Co. will meet with KDB officials on Thursday to inquire about terms for acquiring the country's second largest automaker. The delegation from Ford Motor arrived Wednesday amid reports that its rival General Motors Corp. (GM) was in the best position to win the bid for Daewoo Motor. General Motor has officially proposed taking over Daewoo Motor, demanding the government renew its exclusive negotiator status that expired in November. (China Daily 06-Jan-2000, The Nation 05-Jan-2000) HYUNDAI GROUP: Park Sae-yong scapegoat of power struggle? --------------------------------------------------------- Park Sae-yong, the main man behind Hyundai Business Group's restructuring office, was transferred to the post of chairman of Inchon Steel, the steel arm of the chaebol, only five days after he was appointed chairman of Hyundai Motor. The nation's business circles are abuzz with the surprising appointment, with various rumors suggesting growing discord among Hyundai's top brass. Hyundai's official have been scrambling to explain the sudden change. Park had been given the coveted job of Hyundai Motor after honorary chairman's Chung Ju-yung's approval. Chung was reported to have made the decision after Park had successfully completed the difficult mission of spearheading the restructuring of the chaebol. Chung had intended to send Park to the automobile division to work under Chung Mong-koo, son of the elder Chung and chairman of the Hyundai Motor. But with Chung Mong-koo already working closely with longtime protege, Lee Kye-an (currently president of Hyundai Motor), a second chairman was found superfluous. Hyundai insiders said the younger Chung consulted his father on the reshuffle and the Hyundai founder agreed. While Park's new appointment as chair of Inchon Steel may be considered a demotion, Park is said to have willingly accepted the appointment. "Irrespective of his title, Park is a hired manager and doesn't belong to the `royal family'," said a senior Hyundai official. (Digital Chosun, Korea Times 05-Jan- 2000) SAMSUNG MOTOR CO.: Wants acquisition done by end of March --------------------------------------------------------- Samsung Group confirmed it is in talks with France's Renault to sell its ailing auto unit, saying it wanted to wind up the deal by no later than the end of March. "We hope to wrap up the talks with Renault by the end of March," said Ha Ju-Ho, an official at Samsung's restructuring body. Ha said Renault's stated position that it wishes to acquire Samsung Motors' assets but not its debts, was acceptable. "Samsung is to take care of the auto unit's debts as committed earlier before," Ha said. "So, Renault's position does not surprise us." Samsung Group chief Lee Kun-Hee promised to hand over 2.8 trillion won of personal assets to guarantee the unit's debt of 4.3 trillion won ($3.8 billion) after it was placed under court receivership in last July. Samsung Motors, founded in 1995, produces a single model, the luxury SM5, at the group's only automobile factory, in the southern port of Pusan. But it was hard hit by the nation's economic crisis which erupted in late 1997. The factory uses a manufacturing process based on Nissan technology and has an annual production capacity of 240,000 units. Analysts said the renewed foreign interest in South Korea's robust auto market could drive local manufactures into seeking similar tie-ups to retain their market share. (Business Day 06-Jan-2000) =============== M A L A Y S I A =============== TIME ENGINEERING BHD: Rejects offers, to go it alone ---------------------------------------------------- Opting out of three offers for its telecommunications assets, including one from Singapore Technologies, Time Engineering Bhd has decided to approach creditors with fresh proposals just two days before the creditor protection period ends. Sources told the Sun newspaper that the steep re-rating of telecommunications companies and IT stocks worldwide in recent months has made it possible for Time to renegotiate with its creditors. The new proposal, involving conversion of debt into equity and the listing of its crown jewel, Time Telekom, is expected to turn the company around faster than the proposals structured by the Corporate Debt Restructuring Committee. This way, there will be no capital reduction, sources said. Time is confident that the creditors can be persuaded to convert the 4.5 billion Malaysian ringgit (S$1.95 billion) debt into equity. This is because if Time were to sell its telecom assets, both creditors and shareholders are expected to take a hard knock as the offers could be way below current valuations. According to earlier reports, Maxis Communications Bhd had offered to buy its telecom assets for RM1.2 billion while Singapore Technologies bid RM1.4 billion. Kejora Harta also made an undisclosed bid but it includes settling Time's RM4.5 billion debt. Analysts agreed that if creditors accept the debt conversion plan, Time will emerge with a clean slate and will be able to float off Time Telekom. Time Telekom has over 5,200km of fibre optics spanning the nation through its terrestrial cabling and submarine festoons. This fibre-optic backbone offers superior network architecture and provides resilience and coverage that cannot be provided by just wireless networks. A corporate observer agreed, adding that it only needs strategic alliances to open up the international gateway for Time Telekom to be a strong and credible regional hub for the larger international carriers. (Business Times 06- Jan-2000) ===================== P H I L I P P I N E S ===================== AMALGATED SECURITIES CORP.: SEC rejects FEBTC acquisition --------------------------------------------------------- After barring Far East Bank and Trust Co. (FEBTC) from exercising its rights over two million shares of Amalgated Securities Corp. (Amsec), the corporate court also recently declared the bank's acquisition of the said shares "null and void." Moreover, the Securities and Exchange Commission (SEC) directed FEBTC to "strictly observe" the injunction order and recognize the annulment of its recent foreclosure on the Amsec shares owned by investment firm Trans-Philippines Investment Corp. (TPIC). The SEC decision came after TPIC posted a bond of one million Philippine pesos (US$25,000 at PhP40.01:US$1) for the issuance of the writ of preliminary injunction. FEBTC acquired the Amsec shares as part of its foreclosure proceedings against the cash-strapped investment firm. Earlier, TPIC asked the SEC to stop FEBTC from making any further dispositions of the Amsec shares (of TPIC) which were sold at a public auction by notary public Teodoro V. Angel. (Business World 06-Jan-2000) NATIONAL STEEL CORP.: PNB may condone its debt ---------------------------------------------- Philippine National Bank, upon the prodding of its board director and single biggest stockholder Lucio Tan, is willing to condone its P5.64 billion in loans to National Steel Corp. to accommodate the entry of a local and foreign consortium closely linked to the beer and tobacco magnate. A banking source said the proposed debt condonation would be made once the Securities and Exchange Commission appoints a management committee friendly to the cause of PNB and its co-creditor banks. NSC's management team--Hottick Investments-Renong Bhd. of Malaysia--recently foiled PNB's attempt to foreclose the steel company's assets when it obtained a court order barring the sale of its assets. Hottick-Renong also filed a petition for a suspension of debt payment and is awaiting approval from the SEC for its rehabilitation program. Hottick-Renong might have gained the upper hand with the temporary restraining order and its SEC petition, a source said tables are likely to be turned with an impending change in leadership at the SEC as part of the sweeping Cabinet revamp to be unveiled this week. Since the SEC has the prerogative to appoint members of the receivership committee, the source said the SEC was likely to put PNB and the banks in charge of rehabilitating NSC while Hottick-Renong would be eased out. With PNB at the helm of the receivership committee, the source said it was considering to write off its loans to NSC to ease the financial burden to the incoming investor group which is most likely to be led by Cathay Pacific Steel Co. (Capasco) which is owned by Presidential Adviser on Iron and Steel Johnny Ng and banker Benjamin Chua. PNB had earlier proposed to convert its debt into equity in NSC. Ng and Chua are close business associates of Tan who has secretly amassed a 35-percent stake in PNB and is in the best position to buy the government's remaining 30-percent share in the government. Tan's other bank, Allied Banking Corp., has made substantial loans to the Cathay group of companies before the 1997 currency crisis. Tan's Grand Span Development Corp., a leading steel fabricator, is also expected to benefit handsomely from a takeover of NSC. Tan's son, Michael, is married to a daughter of Ng. Chua is a member of the board of trustee of University of the East which is owned by Tan. All three are top officers of the Federation of Filipino-Chinese Chamber of Commerce and Industry (FFCCCI)--Tan is president, Ng is first vice president, and Chua is executive vice president. Capasco is interested in taking over NSC's billet shop while NSC's other lines--hot rolled coils, cold rolled coils, and tinplate lines--would be transferred to an unidentified Taiwanese group either as technical partners or financiers or both. With NSC's billet shop under its fold, Capasco will have a monopoly in the production of billets used in making rebars and angle bars (for construction) and wire rods for nails, nuts and bolts, galvanized iron wire, chicken wire and barbed wire. PNB has the biggest exposure among NSC's 14 creditors with P5.64 billion. NSC has outstanding loans of P16.12 billion of which P13.2 billion is owed to banks, P2.1 billion to suppliers, and P820 million to the government. In its proposed rehabilitation plan, Hottick-Renong requested that banks convert all their debts into non- voting, preferred shares in NSC. Hottick Renong has proposed to condone half of its loans to the government's and 20 percent of its payables to suppliers with the balance to be paid over five years without interest. This plan is meant to free up NSC from its debt servicing burden while it replenishes its capital base (NSC needs at least $130 million to restart its plant which has been closed since November) and enhance its operations to compete with imports. But the Malaysians are fighting an uphill battle in retaining control of NSC because the banks are being backed by the government which ironically stands to lose its 12.5-percent stake in NSC if the firm's assets are foreclosed. Trade and Industry Senior Undersecretary Lilia R. Bautista confirmed there have been talks about the debt condonation scheme but decline to give details, saying it is not her area of expertise as far as government discussions to help salvage Asia's first integrated steel company is concerned. However, she said government discussions to help NSC through adjustments in import duties are still underway. Earlier, she said the proposal was to impose a moratorium and minimum prices on the importation of steel products that compete directly with those of NSC. Late last year, the Department of Trade and Industry (DTI) imposed a dumping bond on billets based on an NSC petition against steel imports from Russia. Recently, she said the question is "Should we lift the bond or not?" Meantime, there is also an ongoing standoff between upstream and downstream steel industry players on sanctioning steel imports. After the DTI determined a prima facie evidence that Russian producers were dumping their goods into the domestic market, it imposed a bond and forwarded the case to the Tariff Commission for formal investigation. Participants of the downstream industry which produces finished goods using intermediate materials like billets are questioning the propriety of imposing bond or dumping duties later on grounds there is no sufficient supply of billets in the domestic market since NSC has stopped operations. (Philippine Daily Inquirer, Business World 06- Jan-2000) NATIONAL STEEL CORP.: Enrile seeks Senate probe of NSC deal ----------------------------------------------------------- Sen. Juan Ponce Enrile filed a resolution yesterday calling for a Senate inquiry on the circumstances that led to the sale of government equity in the National Steel Corp. (NSC) and into its eventual shutdown. Enrile, chairman of the Senate committee on government corporations and public enterprises, in his Senate Resolution 650 said that while the privatization of the NSC was envisioned as a major foreign investment that promised efficient management and operation of NSC the outcome was opposite. "Contrary to expectations, the privatization of the NSC has resulted to the cessation of its operations and, consequently, the loss of jobs of thousands of Filipino employees as well as loss of vast amount of revenue for the national government and the city of Iligan," Enrile said. The Cagayan senator said since November 1999 the NSC has reportedly ceased operations allegedly due to lack of capital to sustain its operations. It has a pending petition of suspension of payment with the Securities and Exchange Commission. Enrile said the Senate investigation will try to determine the reasons and causes which led to the eventual shutdown of NSC and to avoid similar situations in the future. Meanwhile, a revamp in the Executive Department could work in favor of the bankrupt National Steel Corp. (NSC), banking sources said yesterday. One possibility, they said, is the condonation of NSC's P5-billion debt with the Philippine National Bank (PNB). According to banking sources, the revamp is expected to pave the way for the entry of a group of foreign and local investors into the NSC. They said this is the same consortium that was lobbying for government support ranging from tax reliefs to the imposition of import restrictions on imported steel products to protect the company from competition. According to the source, the revamp will include the replacement of Perfecto Yasay Jr. as chairman of the Securities and Exchange Commission (SEC) where NSC just filed a petition for the suspension of payments on its P15- billion debt, the appointment of a receivership committee and the rehabilitation of the company. The source said this would clear up the way for the NSC to be put under rehabilitation instead of being foreclosed as was planned by its creditors, including the PNB. NSC's creditors had gone as far as setting the auction date for the sale of NSC's assets but this was blocked by a court order and later by the SEC when the company's Malaysian owners filed for rehabilitation and the appointment of a receivership committee. According to the source, beer and tobacco magnate Lucio Tan, who controls four of the 11 seats at the PNB board, is willing to condone NSC's debts to allow the consortium to come into the country's biggest and oldest steel milling company. "He wants to let the consortium in," the source said. The consortium had asked the government for the maximum protection of import restrictions which the Department of Trade and Industry (DTI) had been directed to look into in order to determine how far protection could go without violating the rules of the World Trade Organization. Among the things being considered is the possibility of invoking a provision in one of the WTO agreements allowing countries to impose import quotas if the affected domestic industry is considered to be a "threatened industry." (The Philippine Star 06-Jan-2000) SHEMBERG MARKETING CORP.: To make debt-for-asset swap ----------------------------------------------------- Shemberg Marketing Corp., the country's biggest carrageenin manufacturing company, will sign next week a debt-for-asset swap agreement with creditor banks led by Equitable PCI Bank. Benson Dakay, chief executive officer, said company officials and representatives of the consortium of creditors are now finalizing the terms of the omnibus agreement to restructure Shemberg's estimated 2.4-billion- peso (US$60 million at PhP40.01:US$1) loan. Mr. Dakay said the agreement will convert the company's "unsecured" loans which comprise around 50% of its total outstanding obligations with various banks. These loans will be converted into equity in the company's operations in Mandaue, Lapu-Lapu and Zamboanga. Signing of the agreement has been tentatively set for January 11 in Manila. Aside from Equitable PCI Bank, other shemberg creditors are: Land Bank of the Philippines, United Coconut Planters Bank, Far East Bank and Trust Co. and several smaller banks, Mr. Dakay said. (Business World 06-Jan-2000) SOLID BANK CORP.: SEC sets new hearing -------------------------------------- The Philippine Securities and Exchange Commission set a new hearing to determine if there are grounds to stop the sale of a substantial stake in Solidbank Corp. to Metropolitan Bank & Trust Co., or Metrobank. The securities watchdog set the new hearing for Monday. After that hearing, the SEC is expected to decide on the petition of Canada's Bank of Nova Scotia that sought a ruling on whether its right of first refusal to about 38% of Solidbank extends other shares. Bank of Nova Scotia own 40% of Solidbank, which is part of the 78% it acquired in 1978 in partnership with the Madrigal family. The 1978 shareholders' agreement gave it right of first refusal for the Madrigal family's stake. But Metrobank in November offered to buy close to 51% of Solidbank - a share block that includes those owned by the Madrigal and Lim families. Scotiabank was given until Dec. 27 to match Metro bank's offer for the share block, or the sale will proceed. (The Asian Wall Street Journal 05-Jan- 2000) =============== T H A I L A N D =============== SAHAVIRIYA OA PLC: Realigns 14 subsidiaries into 4 units -------------------------------------------------------- Sahaviriya OA Plc Wednesday announced a major restructuring by merging all 14 subsidiaries into the parent company and establish four key units to focus on its core business as IT trading firm. Sahaviriya OA's CEO Jack Min Intanate unveiled the re- engineering following its agreement with creditors on a Bt7.8 billion debt restructuring, and the court approval of its business rehabilitation plan, which will be accomplished within the first quarter of this year. After the rehabilitation process has been accomplished, SVOA will start from a clean slate without debt and accumulated loss. Its current registered capital of Bt300 million will ultimately be recapitalised to Bt2 billion with creditors holding 80 per cent stake through debt to equity conversion. Creditors holding 76% of the company's debts have officially accepted SVOA's plan to resolve payments totalling seven billion baht, ensuring that corrective action is taken. The remaining creditors opposed the plan. Under the plan, SVOA will give up its 45% stake in Acer Computer, as payment of 250 million baht owed to the company, a secured creditor. Ownership of the SVOA Building on Rama III Road will be transferred to creditors to clear debts totalling one billion baht. SVOA will write down its registered capital to 200 million baht from 300 million to partially write off its losses, and then raise capital by 1.8 billion baht, to two billion, with all the new shares taken by creditors who will end up owning 90% of the company. SVOA will then write down its capital again, by 1.5 billion baht, to 500 million, to write off its remaining losses. The four strategic business units are IT Distribution (ITSBU), System Integration (SISBU), IT Project (ITPSBU), and IT Superstore. ITSBU will be in the business of selling PCs and hardware and in the long term develop e- commerce channels. Sale revenue from this unit is projected to total Bt2.3 billion, accounting for 60 per cent of total revenues this year. SISBU, meanwhile, will focus on installing computer systems for corporate clients. The unit's sale target for this year is Bt562 million, accounting for 20 per cent of group revenues. Jack said that the third unit would focus on bidding for government projects. The unit is expected to earn Bt338 million in revenues, accounting for 15 per cent of total revenues for this year. The last unit would operate retail outlets for PCs, IT products and office automation equipment. It is now comprised of two outlets, one at Panthip Plaza and the other at Tawanna. Its sale revenue target for this year is Bt850 million. Since the unit is a joint venture with SVOA's trading partners, who are hardware vendors, only half of its total revenues would go to SVOA in accordance with SVOA's stake in it. It would account for 5 per cent of group's total sales. Jack said SVOA's sales target for this year was Bt4.05 billion with a Bt69 million profit, compared to last year's sales of Bt1.7 billion and a loss of Bt700 million. The company aims to increase its sales by no less than 15 per cent from this year until 2008 when its sales target is expected to hit Bt12.23 billion. "We will focus not only on marketing computers for several brands, but also on developing our own brand, SVOA." The new strategy should ease restrictions placed on SVOA, under the rehabilitation plan, by the third quarter of this year, Mr Jack said. "By the third quarter, we are sure to make a profit and pay a dividend." (The Nation 05-Jan-2000, Bangkok Post 06-Jan-2000) THAI PETROCHEMICAL INDUSTRY: Recapitalization ahead --------------------------------------------------- Thai Petrochemical Industry PCL said its board of directors has approved plans to raise $1 billion in new capital as part of a financial-restructuring plan. Thai Petro is Thailand's biggest problem debtor, accounting for $3.2 billion in nonperforming loans and $300 million in unpaid interest as of December. The company said in a filing to the Stock Exchange of Thailand that it will ask shareholders meeting on Jan 31 to approve in principle a plan worked out with its creditors for restructuring its debts, "to be subsequently amended as necessary" for the benefit of the company. It said it would also ask shareholders to approve the inclusion in the restructuring plan of its proposal to raise $1 billion in new capital. The company gave no details of its recapitalization plans. Thai Petro also needs the approval of creditors who said last month that they will support plans to raise new capital only after it signs a debt-restructuring deal based on a framework agreed to last February. Major creditors opposed the company's proposal to include capital-raising plans as part of the agreement on the grounds it would require lengthy negotiations and delay the debt-workout plan. Under the debt plan approved in February, creditors were asked to swap accrued interest for equity in the company and to reschedule repayment of principle. The petrochemical company stopped servicing its debt in August 1997, after the crash of the baht pushed up the cost of servicing its foreign-currency debt and sent the Thai economy into a tail-spin. In a separate filing to the Stock Exchange of Thailand, Thai Petrochemical's unit, TPI Polene PCL, said its board of directors has approved the company's plan for restructuring of $1.3 billion in debt. TPI Polene, which won majority creditor approval for its plan last month, will also submit the plan to shareholders on Jan. 31. (The Asian Wall Street Journal 06-Jan-2000) THAI TELEPHONE & TEL.: Clarifies debt restructure for SET --------------------------------------------------------- For the clear and accurate understanding by investors, Witit Sujjapong, TT&T executive vice president, reported the following to the SET to clarify some newspaper reports regarding TT&T debt restructuring. TT&T has become a party to the debt restructuring procedures under the supervision of the Corporate Debt Restructuring Committee (CDRAC) on July 20 1999. Together with the creditors and PriceWaterhouseCoopers, their advisor, the Company and Kensington Group, its advisor, have followed the procedures all along. On January 12, 2000 the Company will submit the debt restructuring plan for consideration by the creditors. The creditors can request modification to the plan within 10 business days but otherwise will have to vote to accept or reject the plan on February 16, 2000. Principle of the restructuring plan is similar to other cases whereby a business plan is produced to determine the debt servicing capacity of the Company. Based on the business plan, the amount of debt to be maintained is determined and the remaining portion of debts is converted into equity or quasi-equity. Such principle is accepted by both the Company and the creditors. However, negotiation on other details continues. The Company expects final resolution in a near future. (Stock Exchange of Thailand 06-Jan-2000) 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., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Darryl Henning, Managing Editor, Feliz Ordona and Cristina Pernites, Editors. Copyright 2000. 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 ***