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/raid1/www/Hosts/bankrupt/TCRAP_Public/000110.MBX T R O U B L E D C O M P A N Y R E P O R T E R A S I A P A C I F I C Monday, January 10, 2000, Vol. 3, No. 6 Headlines * C H I N A & H O N G K O N G * BONDMAX DEVELOPMENTS LTD: Facing winding up petition CAPITAL IRON AND STEEL CO.: Signs debt-to-equity pact CHONGQING NEW LAND HIGH-TECH DEV.CO.: Plagues Beijing EAST OCEAN JAPANESE FOODS CO.: Facing winding up petition OLYMPIC PIONEER LTD.: Facing winding up petition PAM & FRANK INDUSTRIAL CO.LTD.: Facing winding up petition RIZTRADE LTD.: Facing winding up petition RUBY ART JEWELLERY CO.LTD: Facing winding up petition UNIWORLD LTD: Facing winding up petition * I N D O N E S I A * BANK INDONESIA: Analysts back Sjahril removal, House silent BANK NIAGA: Merger with Bank Danamon by March likely PT BAKRI CAPITAL INDONESIA: Nirwan Bakrie sued on guaranty PT TIRTAMAS GROUP: Suharto relative faults IBRA suit * J A P A N * ASAHI BREWERIES LTD.: To spread 120B Yen losses over 3 yrs. ASHIKAGA BANK: Forms restructure follow-up committee DAI-ICHI KANGYO BANK: Facing wrath of shareholder lawsuits INDUS. BANK OF JAPAN: Facing wrath of shareholder lawsuits * K O R E A * DAEWOO GROUP: Debt talks shift to one-on-one negotiations DAEWOO MOTORS: Creditor seeks total sell-off DAEWOO MOTOR: Ford evaluation team coming; Fiat interested? SSANGYONG MOTORS: Creditor seeks total sell-off * M A L A Y S I A * CHOCOLATE PRODUCTS BHD: Selling assets to repay loans LION GROUP: Revamp scheme only preliminary MEGA TV: HBO Asia suspends its service over unpaid fees * P H I L I P P I N E S * NATIONAL STEEL CORP.: Finance Dept. rejects PNB write-off NATIONAL STEEL CORP.: UK firm keen on buying into NSC VICTORIAS MILLING CO. Gokongwei to bid on sugar firm * T H A I L A N D * NATIONAL FERTILIZER CO.: To cut costs with VAT exemption? RADANATUN FINANCE: To be auctioned off THAI AIRWAYS: Gov't advised to recapitalize, shrink stake THAI PETROCHEMICAL INDUS.: Proceeding with agreed-to plan WANG KANAI SUGAR GROUP: Working with TMB to reschedule debt ============================== C H I N A & H O N G K O N G ============================== BONDMAX DEVELOPMENTS LTD: Facing winding up petition ---------------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing for March 1 on the petition of Law Tai Kam for the winding up of Bondmax Developments Limited. A notice of legal appearance must be filed on or before February 29. CAPITAL IRON AND STEEL CO.: Signs debt-to-equity pact ----------------------------------------------------- Three asset management companies (AMCs), Huarong, Cinda and Orient, have recently signed a framework agreement on debt- to-equity with Capital Iron and Steel Company (CISC), one of China's largest steel and iron producers. The agreement, worth 3.55 billion yuan ($ US428 million), is aimed at reducing CISC's debts, accelerating its technical renovation and increasing the competitiveness of its products. In recent years, the development of the steel giant has been troubled by heavy debts, employee redundancy, and bloated size. The multinational company also manages mining, mechanics, electronics, construction, and navigation industries and engages in international trade. The framework agreement will help CISC minimize financial risk, according to economic analysts. The three AMCs will soon evaluate CISC's assets and accounting and consult on the restructuring of the company's assets, management system and equity transfer. Following that, they will deliver a report to relevant higher authorities before the agreement is implemented. (Asia Pulse 05-Jan-2000) CHONGQING NEW LAND HIGH-TECH DEV.CO.: Plagues Beijing ----------------------------------------------------- An illegal bank which, according to investors and local news repots, was organized and run by city officials in collusion with officials from the People's Bank of China, the central bank that regulates China's banking system, has governmental officials in Beijing scrambling these days. Called the Chongqing New Land High-Tech Development Co., the "bank" closed its doors in April, after having squandered nearly $20 million of its $57.5 million in deposits. Equally remarkable was the degree of official involvement: New Land was founded and staffed by employees of the Chongqing city government, which with 31 million residents is China's largest city and reports directly to the central government. The case has spooked Beijing, which is trying to extricate China's state banks from a mountain of bad debts that have left them technically bankrupt. Worried that news of Chongqing's problems would spark a run on bigger banks, censors have imposed a press blackout, save for a handful of articles that appeared last year in local government-run newspapers. Officials from the central bank and the Chonqing municipal government declined to comment for this article. But anecdotal evidence suggests the problem is widespread. Beijing doesn't release statistics on the number of illegal banks it has closed in recent years, but dozens of such institutions have sprung up in provinces such as Guangdong, Liaoning and Hubei. Chongqing, situated in China's improverished and often chaotic hinterland, seems especially vulnerable. In that city alone, New Land was the 162nd illegal bank set up since 1993, according to local press reports. New Land was founded in 1993, a time of rapid economic growth and get- rich-quick schemes. The bank's general manager was Cao Yang, deputy head of the Chongqing High-Tech Development Zone. His deputy was Luo Guangfen, deputy head of the personnel office in Shaping ba, a district in Chongqing. Originally, a Hong Kong company was supposed to invest in the company, but it pulled out before the deal was consummated. Instead, local press reports say the People's Bank of China allowed New Land to solicit money from ordinary people, attracting $27.2 million in deposits over the next four years. The two founders also created an affiliated company called Hui Xin, which means "gathering money," that gathered $30.3 million in deposits. For four months, Zhang Shi has neglected her farm work for something more crucial to her survival: a daily protest in front of city hall. The 68-year-old mother three is one of 40,000 residents of this sprawling, smoggy city to have lost their life savings to one of the most audacious banking scandals in China's 20-year reform era. Ms. Zhang put her money in what amounted to an illegal bank. Ordinary investors like Ms. Zhang remember New Land well. It rented billboards throughout the city and set up offices in government buildings. "You invested by going into the city government's office," says a bleary-eyed Ms. Zhang, taking a break from lying in the middle of the road, where 100 protesters gathered on a recent afternoon. "They guaranteed 30% interests rates, so it was really appealing." At first, New Land made its interest payments, disbursing more than $6 million to depositors. But the company also wasted huge amounts of money. Local press reports say New Land spend $3.4 million bribing bank regulators and an additional $2.2 million on 17 investment projects that soon went bankrupt. Company officials also profited handsomely: The staff of 50 received $3.6 million over four years. Early last year came the inevitable collapse. With debts piling up, New Land failed to make interest payments, sparking massive protests. On April 30, Mr. Cao died of an unspecified illness and Mr. Luo was arrested, tried, fined $62,000 and sentenced to 10 years in jail. When investors saw that no money was forthcoming, thousands rioted, blocking the roads in front of city hall and shouting: "Government, pay our money back." The government made a plea to Beijing, which issued an emergency loan allowing the city to pay back anyone who deposited less than $600 - a move that satisfied most protesters. Those who had invested more are to eventually get back 70% of their deposits - ernment, already one of China's poorest, with payments of $13 million. But thousands of victims of the banking scandal, dozens of whom protest daily, remain unsatisfied. "Who knows when we'll see the money," says Liu Xin, a retired advertising salesman who invested $2,200 in New Land. "I used to be rich. Now I'm a poor man again." (The Asian Wall Street Journal 7-Jan-2000) EAST OCEAN JAPANESE FOODS CO.: Facing winding up petition --------------------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing for February 16 on the petition of Maruha (Hong Kong) Limited for the winding up of East Ocean Japanese Foods Co. Ltd. A notice of legal appearance must be filed on or before February 15. OLYMPIC PIONEER LTD.: Facing winding up petition ------------------------------------------------ The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing for February 16 on the petition of Chan Kwok Hung for the winding up of Olympic Pioneer Limited. A notice of legal appearance must be filed on or before February 15. PAM & FRANK INDUSTRIAL CO.LTD.: Facing winding up petition ---------------------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing for March 8 on the petition of Messrs. Great Sir International Company Limited for the winding up of Ruby Art Jewellery Co. Ltd. A notice of legal appearance must be filed on or before March 7. RIZTRADE 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 Bangkok Bank Public Company Limited for the winding up of Uniworld Limited. A notice of legal appearance must be filed on or before January 25. RUBY ART JEWELLERY CO.LTD: Facing winding up petition ----------------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing for March 8 on the petition of Lam Yuk Hon (formerly known as Lam Kwok Tung) for the winding up of Ruby Art Jewellery Co. Ltd. A notice of legal appearance must be filed on or before March 7. UNIWORLD LTD: Facing winding up petition ---------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing for January 12 on the petition of Jas Ocean (HK) Limited for the winding up of Uniworld Limited. A notice of legal appearance must be filed on or before January 11. ================= I N D O N E S I A ================= BANK INDONESIA: Analysts back Sjahril removal, House silent ----------------------------------------------------------- Analysts support President Abdurrahman Wahid's move to replace Bank Indonesia governor Sjahril Sabirin, but major factions at the House of Representatives have yet to give a response to his proposal. Pande Raja Silalahi of the Center for Strategic and International Studies and Lulu Harsono, president of Bank Pikko, said on Thursday it was high time to reshuffle Bank Indonesia's board of governors, including the governor, to restore its credibility. "They should be reshuffled, or at least moved aside. This is necessary to restore the central bank's credibility," Pande Raja said. He said what President Abdurrahman had done was right, and the House should respond quickly to minimize possible damage to the central bank following the announcement of the damning audit report on BI by the Supreme Audit Agency. "The House should not wait until the completion of the investigative audit on the central bank. The proposal (to reshuffle the board of governors) is not based solely on the audit, but on the spirit to clean up BI," he said. Lulu shared Pande Raja's argument and said that Bank Indonesia, under the current management, was still not transparent, as demanded by the central bank law. "If you ask me should the Bank Indonesia governor be replaced, I would say yes, he must be replaced. In fact, he should have been replaced long ago, before all these things got worse," he said. Former Bank Indonesia director I. Nyoman Moena, however, disagreed and said that neither the government nor the House of Representatives could remove members of Bank Indonesia's board of governors with reasons not mentioned in the central bank law. Moena said that according the law, the BI governor and deputy governors could be removed from their positions only when their terms expired, when they tendered their resignations, when they suffered disabilities that make them unable to perform their duties or when they were found guilty of committing criminal acts. "No one can remove members of the board of governors. Only with those four conditions, can the President and the House remove the governor and deputy governors," he said. The writers of the law, he said, deliberately made it difficult for anyone to fire members of BI's board of governors with one aim: to uphold the central bank's independency so that no single political power could shake its independency. Meanwhile, major House factions moved cautiously in response to President Abdurrahman's proposal, saying that they must stick to the central bank law. Syamsul Muarif, chairman of the Golkar Party faction, said his faction would not give a response to the President's proposal until the investigative audit on BI was completed. "Only when irregularities are found, can the House propose candidates to replace BI governor Sjahril Sabirin and my faction will be strict on that," he said. He conceded that two names, BI senior deputy governor Anwar Nasution and deputy governor Dono Iskandar, had been spread among House members but said the House was open to others who were considered capable and credible for the position. Sukowaluyo Mintohardjo of the Indonesian Democratic Party of Struggle (PDI Perjuangan) faction concurred, and said his faction would replace Sabirin and other governors only if irregularities were found in the audit. Sukowaluyo, also chairman of the House's Commission IX for finance and the state budget, said the House would maintain its control function to supervise the government and also the central bank. "This is the first time the House has had to take action against the alleged irregularities in the central bank." A.M. Fatwa, House deputy speaker from the reform faction, said his faction would not interfere in any problems in the bureaucracy and the central bank and that it had no suitable candidates for the top position. Fatwa said his faction would support the proposal if the Supreme Audit Agency and the House's commission for finance and the state budget followed up the alleged irregularities. (The Jakarta Post 07-Jan-2000) BANK NIAGA: Merger with Bank Danamon by March likely ---------------------------------------------------- Indonesia's Bank Niaga is likely to merge with Bank Danamon if no foreign investor comes forward with a better offer by March 2000, Deputy chairman of the Indonesian Bank Restructuring Agency (IBRA) Farid Harianto told reporters here yesterday. Presently, three investors have indicated interest in investing in the nationalized bank. Two of them are foreign investors, and the identity of the third one has not been disclosed. Next week IBRA will open the bidding process to the investors concerned according to plan, which will take approximately six to eight months. After that, IBRA will announce the buyer that is most profitable for the government. (Asia Pulse 05-Jan-2000) PT BAKRI CAPITAL INDONESIA: Nirwan Bakrie sued on guaranty ---------------------------------------------------------- PT Sinar Mas Multifinance has filed a bankruptcy suit with the Jakarta Commercial Court against prominent businessman Nirwan D. Bakrie for his allegedly unfulfilled personal guarantee of over Rp 60 billion (US$8.5 million) in defaulted loans, according to a court document. The document, dated Jan. 4, specifies that Nirwan pledged a personal guarantee for a loan extended to PT Bakrie Capital Indonesia (BCI), an affiliated company of family run diversified conglomerate PT Bakrie & Brothers. The loan, which was disbursed in August 1997, was to finance the accounts receivable owned by BCI. The loan matured a year later in August 1998. "Because BCI failed to repay the matured loan, we can recall the loan security which is the personal guarantee from Nirwan Bakrie," said the plaintiff's lawyer Benny Harman from Abdul Hakim G. Nusantara & Partners law firm. Benny said his client had sent letters to BCI asking for repayment of the matured loan, "but they only released a statement that they were not able to repay yet because they had a cash flow problem due to the economic crisis." Benny concluded that with such an excuse, the defendant admitted that the matured debt existed and that they could not repay it. According to the 1998 Bankruptcy Law, the plaintiff has to prove that the party it is charging with bankruptcy -- an individual or a business entity -- has at least one matured debt and two creditors. Benny also said Nirwan's personal guarantee was callable without having first to liquidate the assets of BCI, the direct party that owed the loan. "The personal guarantor can be treated as if he were the direct debtor, according to the existing law," Benny said. Thus Nirwan was responsible as if he were the direct recipient of the loan proceeds, Benny added. Nirwan was qualified to be declared bankrupt, he said, because he also gave a personal guarantee to other parties, namely Bank Lippo, Bank Internasional Indonesia and Bank Nusa Internasional. The court hearing for the case will open next week, according to commercial court staff. (The Jakarta Post 07-Jan-2000) PT TIRTAMAS GROUP: Suharto relative faults IBRA suit ---------------------------------------------------- Businessman Hashim Djojohadikusumo, a relative of former President Suharto, said he regretted the Indonesian Bank Restructuring Agency's move to commence bankruptcy proceeding against one of his companies, believing a debt- pay back agreement could have been reached with more time IBRA started legal proceedings last week against Mr. Hashim's trading company, PT Tirtamas Comexindo, which owes the restructuring agency more than $100 million. "It's the expressed intention of PT Tirtamas Comexindo that a comprehensive settlement be concluded with IBRA," Mr. Hashim said in a statement. Jannus Hutapea, head of corporate relations at Tirtamas Comexindo's parent company, Tirtamas Group, said the company understood it had until the end of January to draw up and submit an agreeable debt-restructuring proposal to IBRA. "It's a case of miscommunication and misunderstanding," he said. The action represented the first time IBRA has initiated bankruptcy proceedings against a firm owned by a member of Mr. Suharto's family. Mr. Hashim is the brother-in-law of Suharto's middle daugther, Siti Hediati Prabowo. IBRA has considered Tirtamas Comexindo a "non-cooperative debtor" since June, when it refused to sign a letter of commitment to work out acceptable solutions for its debt problems. The lack of access to the company's financial records was a driving factor behind the lawsuit, agency lawyers said this week. (The Asian Wall Street Journal 06- Jan-2000) ========= J A P A N ========= ASAHI BREWERIES LTD.: To spread 120B Yen losses over 3 yrs. ----------------------------------------------------------- Asahi Breweries Ltd. (2502) is likely to take extraordinary losses of 120 billion yen over the next three years as it speeds up the restructuring of its finances and reorganizes group companies. The company is hoping to solidify its financial base as the market for beer goes through a period of slow growth. The write-offs stem from paper losses in securities holdings, unfunded pension liabilities and consolidation of subsidiaries. Last year, Asahi posted an extraordinary loss of 81 billion yen, which could cut net profit by 90%. But it expects profit to rebound in 2000 due to higher sales volume and lower sales costs. In the first half of this year, it plans to write off 25 billion yen in paper losses on securities, and in 2001 it will take 25 billion yen to eliminate its estimated pension shortfall. In 2002, it expects to write off 10 billion yen for the closure of a Tokyo brewery, and 13 billion yen over three years for the closure of other facilities. Restructuring group firms could cost up to 49 billion yen over three years, Asahi says. (Nikkei 07-Jan-2000) ASHIKAGA BANK: Forms restructure follow-up committee ---------------------------------------------------- Ashikaga Bank (8335) has formed a committee that will follow up on the implementation of the restructuring plans formulated when the regional bank accepted an injection of public funds last year. Ashikaga Bank has signed a consulting contract with Mitsubishi Research Institute covering all facets of management. The new committee has seven members, comprising two external members -- an MRI researcher and a certified public accountant -- and five bank officials. Beginning in late January, it will meet about two times for every three months. Ashikaga Bank aims to reduce its number of employees from 4,073 as of March 1999 to 3,000 by March 2004, and the number of branches from 137 to 107 by March 2005. (Nikkei 07-Jan-2000) DAI-ICHI KANGYO BANK: Facing wrath of shareholder lawsuits INDUS. BANK OF JAPAN: Facing wrath of shareholder lawsuits ---------------------------------------------------------- The challenging culture of shareholder lawsuits in Japan is causing headaches for companies and their board members. Under current law, directors are personally liable for damages awarded to shareholders who establish that the directors did not act in their best interests. As a result, many firms are rethinking the way they organize their business. Japan's nearly decade-long economic malaise has slowly empowered shareholders. Last year, for example, 240 shareholder lawsuits were pending, up from 84 five years earlier. In one case, directors at Industrial Bank of Japan face potential liabilities of 535 million yen ($5.1 million) apiece as a result of shareholder suits over an equity investment in a failed bank. A spokesman for Industrial Bank says the bank has insurance that partially protects directors. Dai-Ichi Kangyo declined to comment. Former directors at Dai-Ichi Kangyo bank are facing suits over payments to the quasigangsters known as sokaiya, who for decades have made a business of disrupting annual meetings by jeering loudly if a company doesn't pay them to stay away. "Japanese companies are worried," says David Lakhdhir, a lawyer for Paul, Weiss, Rifkind, Wharton & Garrison who recently moved to New York from Tokyo. "They don't know where this is headed." Until the mid-1990s, such lawsuits were rare; it was only in 1993 that the government started keeping statistics on them. For many years, cost and cultural barriers discouraged wronged shareholders from taking action. And even if a suit is successful, damages don't flow to the aggrieved shareholders - instead, payments go to the company. The theory is that since the company was damaged by the board's misdeeds, the company. The theory is that since the company was damaged by the board's misdeeds, the company should receive the compensation. Even now there are significant obstacles to shareholder redress, such as the fact that damages are paltry by Western standards. "Potential liability is far less in Japan than in the U.S.," says Robert Grondine, senior partner at White & Case in Tokyo. The calculus has always been that there is no fine, no real damages. And you don't have to regurgitate profits," he says. As a result, "The calculus here is that you can make money by breaking the law." But in 1993, the fees required to bring lawsuits were drastically reduced, making it cheaper and easier for a shareholder to sue. And while damages are slight by Western standards, many directors' salaries are small enough to make the threat real. A typical director receives a base salary of about 20 million yen to 25 million yen a year. As a result, Japanese firms are trying to take steps to protect themselves. A few casualty companies market insurance against damages. But, ironically, many companies fear that if they take out such policies, their shareholders will sue them for misuse of funds, according to Yutaka Hori of Hori & Associates in Tokyo, who serves as general counsel to the Japanese bankers association. Some companies are resorting to other tactics, such as reducing the number of directors and consulting lawyers before undertaking major initiatives. Typically, when a company reduces its board size, it does so either through attribution, or by giving directors new titles that allow them to avoid potential liability. When Sony corp. reduced its number of directors to 10 from 38in 1997, the official reason was to promote corporate efficiency. But one director says privately that prospective lawsuits were another consideration. A spokesman for Sony says company directors receive insurance protection, but declined to say whether the company or the individual directors pay for it, or how much it costs. "It's a very delicate subject," he says. Companies like Sony that have a high percentage of foreign shareholders are, for cultural reasons, more likely to face suits, lawyers add. At Sumitomo trust & Banking Co. and other banks, a new position has been created that gives certain executives the rights of board members, but not their responsibilities. "It was not something directly to do with (such lawsuits)," says one executive director. "But consequently, I don't have to worry about suits." Lawyers say they are now consulted regularly by firms eager to protect themselves from legal action. At the law firm Aiba & Co., in Tokyo, for example, lawyer mark Halperin is currently advising one Japanese firm on the sale of its stake in an unprofitable joint venture to its partner. His client, worried about litigation from shareholders who may say the price is too low, is trying to get the buyer to agree to pay a higher price in case shareholders go to court over the transaction. "This would have been of mush less concern a few years ago," he says. The results aren't always predictable. Sometimes, says Mr. Lakhdhir of Paul Weiss, the courts actually condone illegal activities. When shareholders sued Nomura Securities Co. for compensating large clients for losses at the expense of smaller clients, the Supreme Court ruled that the practice was illegal but not necessarily detrimental to the interests of shareholders. Nomura says it has discontinued the practice. (The Asian Wall Street Journal 07-Jan-2000) ========= K O R E A ========= DAEWOO GROUP: Debt talks shift to one-on-one negotiations --------------------------------------------------------- The government and domestic creditors of the Daewoo Group will conduct one-to-one negotiations with the group's foreign creditors starting next week, the Corporate Restructuring Coordination Committee (CRCC) said yesterday. The change in method reflects South Korea's desire to resolve the issue quickly so it does not become an obstacle to the sale of one of the group's key units, Daewoo Motors. Talks among Daewoo, its domestic creditors and the steering committee of the group's foreign creditors have been locked in stalemate for a considerable period of time and with time running out, individual negotiations seem the only way to resolve the situation, said a committee official. CRCC chairman Oh Ho-gun has told the steering committee that unless it accepts the recovery ratio proposed by domestic creditors by this weekend or early next week, individual negotiations, with foreign creditors will start. "Since we can't let the Daewoo debt issue remain unresolved beyond the end of this month, I notified the steering committee of domestic creditors' stance during a meeting Wednesday of advisors of the two sides," Oh said. Members of the steering committee have only recently begun to believe in the possibility of Daewoo Corp. being placed under court receivership. "Since they still question the grounds on which we calculated the recovery ratio, it is hard to expect progress in talks with the steering committee," he said. He added that the start of one-to-one negotiations with foreign creditors signals the end of the talks with the steering committee on Daewoo Corp., which in turn means domestic creditors will file for court receivership of the Daewoo unit. An official of Hanvit Bank said because of the deadlock on Daewoo Corp., negotiations on other Daewoo units have been stalled. "From now on, main creditor banks of individual Daewoo units should take the initiative in negotiating with foreign creditors," he said. Meanwhile, a banking source said domestic creditors will meet some of Daewoo foreign creditors in Hong Kong and London next week. CRCC chairman Oh is scheduled to meet foreign creditors of Daewoo Heavy Industries, Daewoo Electronics Co. and Daewoo Motor Co. and their subsidiaries next Wednesday and Thursday, he said. (The Korea Herald, Financial Times 07-Jan-2000) DAEWOO MOTORS: Creditor seeks total sell-off SSANGYONG MOTORS: Creditor seeks total sell-off ----------------------------------------------- One of the main creditors of Daewoo decided Friday to push for an inclusive sell-off of both Daewoo Motors and Ssangyong Motors. Cho Hung Bank reported to Lee Hun-jae head of the Financial Supervisory Commission (FSC), who was visiting the bank to check on the work-out proceedings of Ssangyong, that it will seek to sell Ssangyong with Daewoo because independent operation of the company is highly unlikely as production has significantly dropped due to lack of support from creditors. Cho Hung will consult with the Korea Development Bank, which is in charge of Daewoo Motors, to pursue a joint plan to sell the companies to a third party. (Digital ChosunIlbo 07-Jan-2000) DAEWOO MOTOR: Ford evaluation team coming; Fiat interested? ----------------------------------------------------------- Ford Motor Company of the United States is due to dispatch a special team to launch an evaluation on Daewoo Motor next week. "The Ford delegates vowed they would make decisions at Daewoo in a way that would be of the greatest benefit to the Korean economy and people," said a Korea Development Bank executive. "Due to their lack of detailed knowledge about Daewoo Motor, the Ford delegates said they would bring a fact-finding and asset evaluation team to Seoul next week." The sources predicted that Ford's expression of official interest will help creditors wind up the sale of Daewoo Motor by the end of June. The US auto firm also said that it is moving ahead with negotiations with local auto firms including Hyundai Motor to set up a consortium to jointly takeover the ailing Daewoo Motor. Three Ford staff members led by Paul Drenco, Ford's Asia director, met with officials at Korea Development Bank, the major creditor bank for Daewoo Motor Thursday morning. In the meeting Ford was reported to have said that a fact finding mission will arrive next week to launch a detailed asset evaluation. Drenco, commenting on the idea of establishing a consortium, said Ford has been making contacts with several local auto makers with most of the terms of the consortium left open-ended. Meanwhile, Hyundai Motor President Lee Kye-won told reporters Thursday Hyundai has not made any substantial progress in the negotiation with Ford, yet. In a related development, domestic creditors and Daewoo Motor representatives announced later in the day that they are to set up a committee to oversee the sale of the automaker this week. The establishment of the committee will be timed with the appointment of a new Daewoo Motor chief executive officer this week, they said. Samil Accounting Corp. will take charge of accounting procedures, Pacific Law Firm legal counsel and Morgan Stanley will handle the financial aspect. The committee will select potential buyers from a limited group of bidders who will be required to hand in letters of intent by February. The committee will choose a preferred negotiating partner by March in the hope of finalizing the sale by June. Meanwhile, officials at the Federation of Korean Industries revealed yesterday that Italian auto giant Fiat sent an executive to Seoul toward the end of last year to determine its chances of acquiring Daewoo Motor. The Italian automaker could be ready to join the race to buy the financially-troubled Daewoo unit as the Fiat executive had talks with a number of high-ranking government officials, they said. "Fiat is apparently quite interested in Daewoo's operations in Poland, as it is engaged in fierce competition with the Korean automaker in the Polish car market," said an FKI executive. However, another business source said Fiat will not be allowed to buy the Polish Daewoo plant on its own because government policy maintains the carmaker should be sold off as a whole. (Digital ChosunIlbo 06-Jan-2000, Korea Herald 07-Jan-2000) ============== M A L A Y S I A =============== CHOCOLATE PRODUCTS BHD: Selling assets to repay loans ----------------------------------------------------- Chocolate Products (M) Bhd said it plans to dispose a range of its chocolate businesses and assets to raise RM53.5mil cash to repay bank borrowings. In a statement to the KLSE yesterday, the company said the assets would come from various wholly-owned units, and would be sold to the Maestro group of companies. The subsidiaries involved are Chocolate Products Manufacturing Sdn Bhd, Chocolate Products Trading Sdn Bhd, Darry's Confectionery Sdn Bhd and Chocolate Vochelle AG. Among the proposed disposals include the Vico businesses and two industrial buildings for some RM25.4mil cash as well as two plots of land all located in Penang. Chocolate Products has also proposed to dispose its intermediate cocoa products business, proprietary chocolate business, chocolate trading business, confectionery business and some trademarks. Following the disposals, the company would incur losses of some RM11mil, and reduce the group's earnings per share by three sen, Assuming that the exercise could be completed by June 30. On a proforma basis, the proposed disposals were expected to decrease the group net tangible assets per share by four sen, based on the company's audited consolidated balance sheet as at June 30. The company said the completion of the proposed exercise was conditional upon the approval of the relevant authorities. (The Star 08-Jan-2000) LION GROUP: Revamp scheme only preiminary ----------------------------------------- The Lion group has drawn up a preliminary scheme to restructure its five units Lion Corp Bhd, Amsteel Corp Bhd, Lion Land Bhd, Chocolate Products (Malaysia) Bhd and Posim Bhd. The group said in a statement the advisers of its units were having discussions with the relevant creditors and obtaining feedback on the preliminary scheme. Lion group said this in response to a recent Bloomberg report headlined Malaysia's Lion Plans RM3.4bil Reorganisation of Units, which subsequently led the KLSE to query Lion in accordance with the exchange's corporate disclosure policy. The group said the preliminary scheme did not constitute a formal proposal for the debt restructuring of its units and was intended solely to elicit feedback from creditors. It said a more definitive proposal would be made to the creditors, incorporating adjustments to the preliminary scheme following negotiations and receipt of feedback from them. (The Star 07-Jan-2000) MEGA TV: HBO Asia suspends its service over unpaid fees ------------------------------------------------------- Cable-movie channel HBO Asia said it had suspended service to Malaysian cable operator Mega TV because of outstanding fees. "Despite numerous attempts by HBO to work with Mega TV, the parties failed to reach an agreement on the fees owed to HBO Asia," HBO Asia said. Mega TV was one of the two cable operators in Malaysia providing the HBO service. Malaysia's largest cable operator, Astro, still offers HBO, HBO Asia said. Singapore-based HBO Asia is an arm of HBO Pacific Partners, a joint venture between Time Warner Entertainment, Paramount Films of Southeast Asia Inc., Sony Pictures Entertainment and Universal Studios Inc., the company said. (The Asian Wall Street Journal 07-Jan-2000) ===================== P H I L I P P I N E S ===================== NATIONAL STEEL CORP.: Finance Dept. rejects PNB write-off --------------------------------------------------------- Condoning National Steel Corp.'s (NSC) 5.64-billion-peso (US$139.7 million at PhP40.376:US$1) debt to Philippine National Bank (PNB) will be an "imprudent decision," outgoing Finance secretary Edgardo B. Espiritu said yesterday. While clarifying he was not aware of such deal, Mr. Espiritu said "I do not think (PNB) will do that." The government is reportedly considering the possibility of getting semi-private PNB to condone debts to NSC and make the steelmaker more attractive to investors. There have been unconfirmed reports taipan Lucio Tan is eyeing the purchase of NSC through a local steel firm. Mr. Tan also owns 35% of PNB. NSC ceased paying its loans totalling PhP16.2 billion ($401.2 million) citing financial difficulties. To pull off the debt condonation deal, the government and PNB will have to get a favorable move from the Securities and Exchange Commission to approve the loan-write off. But writing off NSC loans will mean additional burden to the already unattractive non-performing loan portfolio of PNB, Mr. Espiritu said. The Department of Finance (DoF) wants to keep the semi- private bank attractive to investors to pave the way for the planned full privatization by April. The government committed to offer to interested buyers its remaining 30% stake in PNB through a public bidding. Mr. Espiritu, earlier admitted that the entry of the Tan group to PNB "may limit the number of participants to the public auction." He added the government may even do a public bidding twice "if the first auction fails." Mr. Espiritu also admitted that the due diligence audit of PNB by PriceWaterhouse Coopers and Lehman Brothers "is not very encouraging." (Business World 07-Jan-2000) NATIONAL STEEL CORP.: UK firm keen on buying into NSC ----------------------------------------------------- British Steel Co., one of the biggest steel companies in the United Kingdom, has expressed interest to buy into cash-strapped National Steel Corp., industry sources said yesterday. The sources said the proposal from British Steel was among the options being studied by the government for the rehabilitation of NSC. The Hottick group of Malaysia, which controls 82.5 percent of NSC, was able to secure from the courts an order restraining the creditor-banks' bid to foreclose on its assets. Foreclosure proceedings led by semi-private Philippine National Bank were supposed to start last Dec. 22. The sources said representatives from British Steel had already met with some government officials before the Christmas break. They said British Steel was planning to tie up with local investors in bringing NSC back to a viable financial footing. The government has estimated that NSC would need a fresh equity infusion of at least $70 million to jumpstart its rehabilitation. Outgoing Finance Secretary Edgardo Espiritu earlier announced that the government planned to tap a consortium of local downstream steel industry players to raise the initial $50 million funding for NSC. A new foreign strategic partner was envisioned to come in later. The group of tobacco magnate Lucio Tan was also earlier reported to be interested to vie for the control of NSC. Another foreign group, Ispat International NV, was likewise keen on investing in NSC but could not commit on an amount of fresh equity infusion acceptable enough to the creditor- banks. With the foreclosure proceedings stalled, however, the creditor-banks would not be able to take a pro-active role in the rehabilitation of NSC nor in the negotiation with a new investor. This was the reason why PNB was urging the Hottick group to waive control of the company without having to await foreclosure proceedings. PNB has total exposure of more than P5 billion in NSC, representing around 45 percent of the steel firm's liabilities. Hottick was believed to be the investment vehicle of the Renong group of Malaysia. The Hong Kong- based investment firm was widely expected to sell the stake after taking over NSC from Wing Tiek Berhad, another Malaysian group. Renong, however, has been unable to complete its purchase because of cash problems back in Malaysia. The Estrada administration is considering to file graft cases against the Wing Tiek Berhad of Malaysia, the group which had acquired NSC after its privatization in 1995. At the same time, it is conducting a probe on possible mismanagement and other violations made by Hottick after it bought out Wing Tiek's 82.5-percent stake in the country's largest steel firm. NSC is saddled with P13 billion worth of debts to various creditor-banks. (Philippine Daily Inquirer 07-Jan-2000) VICTORIAS MILLING CO. Gokongwei to bid on sugar firm ---------------------------------------------------- Chinese-Filipino tycoon John Gokongwei, Jr. will make a bid for 53.35% of sugar miller Victorias Milling Co. (VMC), which will be put on the auction block on March 20, industry sources said. As part of its rehabilitation plan, 567 million new shares of VMC are slated to be auctioned off to prospective investors on March 20 at a floor price of 567 million Philippine pesos (US$16.5 million at PhP40.376:US$1). Interested bidders are given until January 12 to formally signify their intent to bid as well as submit prequalification requirements. Industry sources said Mr. Gokongwei is one of two interested bidders who have formally signified their interest to participate in the VMC share auction. Mr. Gokongwei owns majority of listed conglomerate JG Summit Holdings, Inc., parent of food company Universal Robina Corp. (URC). The taipan also controls three sugar mills, which account for 20% of the country's total sugar milling capacity. It was earlier reported that Mr. Gokongwei's interest in VMC was waning, after the sugar milling company's rehabilitation met with much delay. "I was very interested last year. This year, I don't know. Up to now, nothing has been decided... I don't know what's going on. They will always say yes, yes, but up to now (nothing)... So many tomorrows," Mr. Gokongwei said last year. BusinessWorld tried to seek confirmation from JG Summit, but their officials were unavailable. The sources said another company has indicated interest in the sugar miller, but did not identify the firm. Jardine Davies, Inc., which proposed an "operational merger" between its sugar refiner arm Hawaiian Philippines Co., Inc. (HPCI) and VMC, "is not interested in bidding," the sources said. HPCI's refinery, which is smaller than VMC's, is located in Silay City, the next sugar district after Victorias in Bacolod. Other parties reported to be earlier keen on VMC include Central Azucarera de Don Pedro, Central Azucarera de la Carlota, San Miguel Corp. and the Lucio Tan group led by Asia Brewery. Interested parties have until January 12 to register for the auction. Meanwhile, VMC is not getting itself a new financial adviser to replace recently resigned Bankers Trust Co. The sources said the role of the financial adviser "would not be as critical" now, with the bidding process already scheduled. "All the financial data has been prepared... The bidding process is just mechanical... so the financial advisor role would not be as critical," one of the sources said. Bankers Trust earlier resigned as financial advisor of the ailing sugar miller to avoid possible "conflict of interest." Bankers Trust, which has been VMC's advisor for one and a half years, was recently acquired by German bank Deutsche Bank, one of the major unsecured creditors of VMC. A Deutsche Bank executive also represents the unsecured creditors and is a member of the VMC management committee (mancom). VMC has PhP3.2 billion ($79.2 million) in unsecured debts and PhP1.3 billion ($32 million) in secured loans from creditor banks. Creditor banks of the cash-strapped sugar miller will auction off 567 million in new VMC shares that will raise PhP567 million in fresh capital for the firm. The winning bidder, which will infuse the needed PhP567- million equity in VMC, will secure a controlling majority stake in the firm, leaving existing shareholders with a diluted stake. Meanwhile, the management and staff of VMC are open to the prospect of having industrialist John Gokongwei, Jr. as the company's new majority owner. A company official, who requested anonymity, said they are prepared to accept Mr. Gokongwei as VMC's new majority shareholder in case he wins in a share auction to be held by the VMC management. "Kung sino man ang manalo, tatanggapin namin (We will accept whoever will win) because this is a process which has been approved by the SEC (Securities and Exchange Commission)," the official said when asked about the possibility of Mr. Gokongwei investing in VMC. "People within the organization are prepared to take whatever consequence that will come with the bidding," the source told BusinessWorld in a telephone interview yesterday. Sources in the banking industry have named Mr. Gokongwei as one of two interested bidders who have formally signified their interest to participate in the VMC share auction. VMC's management was initially concerned about Mr. Gokongwei's desire to invest in the sugar mill given his reportedly negative track record in running his three existing sugar mills. "Planters who used to bring their cane to his mills have complained of getting lower sugar content for their cane, among other problems. Because of this, they have opted to mill with us instead even if VMC is not that near their district," the source said. The official, however, said they are optimistic Mr. Gokongwei will continue running VMC the way it is being managed now and that his new ownership will encourage him to improve the management of his three mills. "Well, we hope that his track record will not carry over (into his ownership of VMC). Maybe in seeing what we're doing now, he will change the way he's running the other mills. He can in fact make VMC his model," the official said. VMC, the country's largest sugar mill, accounts for 40% of the country's yearly sugar output. Mr. Gokongwei's controls three sugar mills, namely: Southern Negros Development Corp. (Sonedco), Cagayan Sugar Milling Co. (Carsumco) and Universal Robina Sugar Corp. (Ursumco). These three mills produce about 20% of the country's yearly sugar production. if Mr. Gokongwei successfully gains control of VMC, he will effectively be able to produce close to 60% of the country's yearly sugar output. (Business World 07-Jan-2000) =============== T H A I L A N D =============== NATIONAL FERTILIZER CO.: To cut costs with VAT exemption? --------------------------------------------------------- The Industry Ministry has said it will discuss with the Finance Ministry its plan to help the ailing National Fertilizer Company (NFC) by offering it value added tax (VAT) exemption. Industry Minister Suwat Liptapallop said NFC asked the ministry to help reduce production costs by granting VAT immunity. In addition, NFC says it pays 7 percent tax when buying domestic raw materials while fertilizer exporters are exempt from import duties and are automatically exempt from paying VAT. The Office of Industrial Economics, meanwhile, endorses the plan, saying that NFC is the only Thai fertilizer company which is trying to compete with exporters. In addition, farmers are benefiting from cheap fertilizers from the company. To stay viable, NFC must produce 800,000 tonnes of product. However, the company is only operating at 60 percent of its capability, producing 600,000 tonnes a year. Moreover, the firm feels that cashflow problems and the high cost of raw material are impairing its operation. Late last year NFC restructured its 5.1 billion baht debt by swapping 2.1 billion baht of debt to equity and reducing its burden on loan services. Moreover, under the debt restructuring process, NFC raised additional capital of 3 billion baht. Debt repayment installation will start in June, 2001. Debt restructuring alone is not sufficient to keep the company afloat. With fierce competition in the market, NFC needs to reduce its expenditure, find new markets and increase its sales, a source at NFC said. (Business Day 07-Jan-2000) RADANATUN FINANCE: To be auctioned off -------------------------------------- Bank of Thailand plans to auction a 99.99% stake in Radanatun Finance in the next several weeks. BankThai will serve as financial adviser with Siam Premier International as legal adviser. Terms of reference for the bid will be available from Jan 10-18. A preliminary bid and technical proposal must be submitted on Jan 27, with a contract with the winning bidder to be signed on Feb 21. Legal procedures and transfer are to be completed in early March. Radanatun Finance is a former subsidiary of Radanasin Bank. The central bank's Financial Institutions Development Fund sold a 75% stake in Radanasin to Singapore's United Overseas Bank (UOB) last year. The central bank said Radanatun was not included in the Radanasin sale because UOB had a different business strategy in mind. Regulators said they were confident that the new sales process would help maximise returns for the government. Radanatun was established in February 1998 by the government with registered capital of 500 million baht. Its main business is hire-purchase, after its successful 3.3 billion baht bid for assets auctioned by the Financial Sector Restructuring Authority in July. (Bangkok Post 07- Jan-2000) THAI AIRWAYS: Gov't advised to recapitalize, shrink stake --------------------------------------------------------- Financial advisers for Thai Airways have proposed that the Thai government sell about 400 million new and existing shares in the airline this year, a move that would reduce its holding to 70% from 93%, a government source said. Under the proposal, which aims to raise fresh capital, the national carrier would issue about 300 million new shares while another tranche of about 100 million shares will come from the holding of the Finance Ministry, according to an official in government committee considering the plan. The official, speaking on condition of anonymity, said the committee is likely to make a decision on the proposal within three weeks. The plan needs approval from the cabinet before Thai Airways can go ahead with the sale. The Finance Ministry currently holds 1.3 billion shares in the carrier. The airline first announced a plan to issue new shares to raise capital last June, with the aim of cutting the Finance Ministry's holding as a step toward privatization. "Thai Airways has a high amount of debt compared with its equity, so the proposal suggest expanding the equity base," the official said. A Merrill Lynch report has said the company had debt at 9.6 times its equity at the end of 1999. The official said the share-sale plan would also specify how Thai Airways should spend the new funds. He didn't elaborate. He declined to discuss how the shares would be sold, but said the committee didn't rule out the option of selling the shares to a new strategic partner. On the Thailand Stock Exchange Wednesday, shares of Thai Airways closed at 54.50 baht ($1.48), down 3.5%, or two baht. (The Asian Wall Street Journal 06-Jan-2000) THAI PETROCHEMICAL INDUS.: Proceeding with agreed-to plan --------------------------------------------------------- Creditors of Thai Petrochemical Industry Plc (TPI) yesterday reiterated their determination to carry out a debt restructuring plan agreed to by all parties last February, without any amendments. Representing Thai and foreign financial institutions, the creditors' steering committee said TPI's return to stability depended on the successful implementation of the plan. Said the committee in a statement, "All creditors, Thai and foreign, are resolved to implement the agreed restructuring plan by Jan 17." TPI wants to raise $1 billion in new capital this year, but the creditors insist that debt restructuring be completed first before any recapitalisation. One of the country's biggest problem debtors, TPI had $3.2 billion in non- performing loans. It also had $300 million in unpaid interest as of last month. Creditors argue that recapitalisation prior to restructuring would require new negotiations and unnecessarily delay the company's recovery. Under the debt plan approved in February, creditors were asked to swap accrued interest for equity in the company, while rescheduling debt repayment periods. TPI's major shareholders, the Leopairatana family, have also expressed concern that the existing restructuring agreement could lead to them losing control of the company. The creditors deny any such plan. "The creditors are seeking repayment of their loans and have no wish to liquidate or take over the company," the committee statement said. The restructuring plan is designed to allow the company to regain its strength and dominance in the petrochemicals industry, said the statement. The agreed plan stipulates that creditors will collectively receive 30% of Thai Petrochemical Industry's share capital in a debt-equity conversion. This figure would not be increased under the plan unless a loan-payment default occurs, or if there is future non-compliance with the terms of the agreement. The implementation of the restructuring agreement would provide protection for TPI with a statutory moratorium and an automatic stay (equivalent to Chapter 11 protection) over the period of the plan. Implementation of the agreement would also generate an opportunity for TPI to raise new equity, the statement stated. The committee said it was still awaiting written confirmation from Thai Petrochemical Industry of its prior acceptance of the February agreement. (Bangkok Post, The Nation 07-Jan-2000) WANG KANAI SUGAR GROUP: Working with TMB to reschedule debt ----------------------------------------------------------- Wang Kanai Sugar Group is negotiating with the Thai Military Bank to complete restructuring of its debts after rescheduling money owed to Bangkok Bank. The company, one of Thailand's top sugar producers, owes Thai Military Bank (TMB) 8.2 billion baht, reflecting both the continued slump in world sugar prices and production inefficiencies. TMB has been asked to reschedule outstanding debt over the next 20 years with a 250-million- baht annual repayment for the first two years. This was a reduction from the previously-required repayment of 400 million baht, said Wang Kanai's managing director, Teera Na Wangkanai. The outstanding debt was incurred by the group's two subsidiaries, Wang Kanai Sugar Refinery in Kanchanaburi and Chai Mongkol Sugar Refinery Co in Suphan Buri. "The continued slump in world sugar prices has weakened the group's repayments and this is the reason for the negotiations on debt restructuring," Mr Teera said. The group also suffered a 4.2-billion-baht foreign exchange loss last year from credit deals with international sugar trading firms. Production inefficiencies of both refineries were also behind the decision to reschedule the debt. However, the group still honoured the existing repayments, Mr Teera said. On Dec 29, the group signed a Bt8-billion debt- restructuring agreement with Bangkok Bank for another two of its subsidiaries, Ratchasima Sugar and TN Sugar Factory, which are sited in the Northeast. The two obtained an eight-year rollover of their debt under the Corporate Debt Restructuring Advisory Committee framework. But Wang Kanai Sugar and Chaimongkol Refined Factory, which are sited in the central region, needed a rollover period of more than eight years because "sugar mills in the central province are not as productive as those in the Northeast," Teera said. Wang Kanai Sugar Refinery is capable of crushing 15,000 tons of sugarcane a day and Chai Mongkol Sugar Refine 18,000 tons. Two more refineries owned by the group, one in Lopburi with a crushing capacity of 24,000 ton a day and the other in Nakhon Ratchasima with a capacity of 40,000 tons, benefit from lower unit costs with the installation of modern machinery. As a result, both refineries successfully rescheduled their eight-billion-baht debt to Bangkok Bank into a new timeframe over the next eight years. They may also secure an additional 3.7-billion-baht credit line from the bank this year for machinery repair and maintenance and for sugar production. To increase profitability, the group plans to tap more export markets in Asia, including China and Indonesia. It has also relocated its Petchaburi sugar-processing plant to Pak Sap in Laos, while its Chonburi sugar mill has been shut down and its facilities moved to the TN Sugar Factory. The group expects output this year to reach 600,000 tonnes compared with 490,000 tonnes last year. Seventy per cent of its output is exported, mainly to Russia and Saudi Arabia. The group forecasts a 12% increase in sugar production this year to 5.209 million (100-kg) sacks and the same revenue turnover this year as the previous year. The main reasons for this are lower sugar prices, partly as a result of increased production worldwide. Direct sugar exports and indirect shipments through Thai Cane and Sugar Corp for the group, are forecast to reach 3.774 million sacks this year, a 22.15% increase on the previous year. 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