/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/000113.MBX T R O U B L E D C O M P A N Y R E P O R T E R A S I A P A C I F I C Thursday, January 13, 2000, Vol. 3, No. 9 Headlines * C H I N A & H O N G K O N G * CA PACIFIC FINANCE BANK: Former chief opts to stay silent GUANGDONG ENTERPRISES: Banks seen as accepting debt plan * I N D O N E S I A * PT DUREE TIMBER INDONESIA: Court declares venture bankrupt * J A P A N * HASEKO CORP: To slash debt to 734B Yen this fiscal year * K O R E A * DAEWOO CORP.: Breakdown in restructure talks forecast DAEWOO CORP.: Court control will lead to lawsuits DAEWOO GROUP: Redemptions not seen ailing Korean trusts DAEWOO MOTORS: Hyundai seeks ally for possible bid DAEWOO MOTORS: GM eyes Seoul for global base HANBO IRON & STEEL: Nabors consortium doing due diligence JOSUN LIFE INS.: Hyundai to acquire troubled company SAMSUNG MOTORS: Renault wants acquisition done in 90 days * M A L A Y S I A * MALAYSIAN AIRLINE SYSTEM: Shares rise on debt workout talk TA BANK: Sale of ailing Malaysian bank approved in Manila * P H I L I P P I N E S * BW RESOURCES CORP.: Stock market darling no more METRO PACIFIC: Delisting, restructuring possible PHILIPPINE NAT.BANK: Nationalization temporarily ceased PILIPINO TELEPHONE CORP.: To finish restructure this month SMI FISH INDUSTRIES: Losses spur stake sale to investors * T H A I L A N D * KGI SECURITIES ONE: Denies capital reduction rumors PADAENG INDUSTRY: Close to acquring new partner THAI AIRWAYS INT'L.: Debt clouds its skies THAI AMARIT BREWERY CO.: KTB seeks rehab for debts THAI OIL CO.: Expects to wrap restructuring up by March THAI OIL CO.: Debt revamp set to reduce NPL total THAI PETROCHEMICAL INDUS.: Irked by restructure fine print ============================== C H I N A & H O N G K O N G ============================== CA PACIFIC FINANCE BANK: Former chief opts to stay silent --------------------------------------------------------- Former CA Pacific boss Jason Wong But-sit has declined to take the witness stand to refute accusations that he stole $248 million to fund a property purchase. "He chooses his right to remain silent," defence counsel Lawrence Lok, SC, told the jury yesterday. No witnesses will be called on his behalf, shifting the near three-month-long trial into the penultimate stage, with concluding submissions to be made by counsel starting on Monday. The fate of Wong and his co-accused, wife Elizabeth Kong Suk-yee, will then be handed over to the jury. The pair deny false accounting between November and December 1997. Wong, who headed the defunct brokerage until two years before it collapsed in 1998, also pleaded not guilty to eight charges of theft. He is accused of stealing $248 million from a CA Pacific Finance bank account in the months before the group's collapse in January 1998. Wong acted as the group's consultant having resigned as general manager in 1996, but was still regarded by staff as "the boss", the jury was told. The prosecution contends that Wong used the money to help fund the $1.24 billion purchase of Century Square in Central. The property was bought by an off-shore company allegedly set up by Wong and his spouse. Wong's elder brother, Alex Wong Ching-ping, a CA Pacific Group director and then chairman of Capital Asia, confronted him in December 1997 over the alleged theft and again in early January 1998, according to the prosecution. Alex Wong subsequently reported the matter to the Commercial Crime Bureau. Alex Wong said he felt it was his "moral obligation" to contact the police over the $248 million, a duty he held to shareholders and employees. Although the family had discussed buying certain floors in Century Square, Alex Wong thought an independent third party was purchasing the entire building, the jury was told. The two defendants, however, told the police they received approval from Alex Wong for the purchase of Century Square, the court heard. Jason Wong was said to have told police that it was "family business." The case, before Mr Justice Gareth Lugar- Mawson, continues at the Court of First Instance. (South China Morning Post 12-Jan-2000) GUANGDONG ENTERPRISES: Banks seen as accepting debt plan -------------------------------------------------------- Creditor banks of Guangdong Enterprises (Holdings) (GDE) will today be given details of the terms and conditions of a debt-restructuring plan for the insolvent arm of the Guangdong provincial government. The meeting for nearly 120 creditor banks would be hosted by a nine-bank working group of the creditors' steering committee, after an in-principle agreement announced between the working group and the Guangdong provincial government a month ago. The nine banks - led by Standard Chartered Bank - hold more than half of GDE's liabilities of US$5.59 billion. An executive from a foreign bank that was not part of the working group said yesterday he was not optimistic that a consensus could be reached among all creditor banks at the meeting. "Things are rather preliminary. We expect to be briefed on the details of the plan, with individual banks having to report to their respective headquarters for further instructions," he said. Although creditor banks will not cast their vote on GDE's renewed debt restructuring plan today, banks are unlikely to have strong opposition to the new proposal, according to analysts. "To us, it's already a done deal," said Chris Fung, an analyst of red chips at GK Goh Research. "What really matters is GDE's impact on red chips." The likelihood of resolving GDE's loan problem had helped to boost sentiment towards red chips, according to Mr Fung. "We expect red chips to make more investment announcements this year as they will find it easier to secure new financing with banks whose confidence in these companies is recovering," he added. GK Goh has upgraded investment ratings for red chips from underweight to neutral after the Guangdong provincial government announced the debt restructuring plan. Other debt-riden mainland companies, such as Yue Xiu Enterprises (Holdings), are also expected to conclude their debt restructuring plans with creditor banks soon, Mr Fung said. This would further boost investors' and bankers' confidence towards the prospects for mainland companies, analysts said. (South China Morning Post 12-Jan-2000) ================= I N D O N E S I A ================= PT DUREE TIMBER INDONESIA: Court declares venture bankrupt ---------------------------------------------------------- The Jakarta Commercial Court has declared Banjarmasin-based plywoodmaker PT Duree Timber Indonesia bankrupt over its unpaid debt of US$1.5 million to PT Hanil Tamara Bank, the plaintiff's lawyer said. Jonson Hutajulu of Fuady, Tommy and Aji Wijaya law firm, who was representing the plaintiff, said the bankruptcy verdict was handed down last Tuesday. "We have managed to prove, as stipulated in the Bankruptcy Law, that the defendant has at least one matured debt and two creditors before being declared bankrupt," Jonson told The Jakarta Post over the phone on Monday. The plaintiff and bankrupt defendant are South Korean joint ventures operating in Indonesia. Jonson said his client advised the defendant, prior to the bankruptcy filing, to avoid legal action by working out a debt restructuring proposal. But the plywoodmaker did not respond to the call, Jonson said. The debt, which matured between September 1998 and October 1998, were loan facilities used by the defendant for its export and import activities and other operations, Jonson said. As much as $830,000 was for the defendant's export and import activities through Letter of Credit (L/C) facilities, $500,000 was for other operating activities and some $170,000 was for overdue interest payments. Jonson acknowledged his client purposely did not include the penalty charge on its overdue interest payments so as not to confuse the court with a questionable figure. "The penalty charge could cancel the status that the loan had matured," he said. There was at least one previous case where a bankruptcy file was rejected by the court because there was a penalty charge included in the unpaid debt claim, Jonson said. Besides, the 1998 Bankruptcy Law only specifically recognized the existence of a debt principal and its overdue interest payment, Jonson added. PT Duree Timber Indonesia is a foreign affiliate of Duree Lumber Industrial Co. Ltd. of South Korea, which has a stake of more than 90 percent in the company concerned. (Jakarta Post 12-Jan-2000) ========= J A P A N ========= HASEKO CORP: To slash debt to 734B Yen this fiscal year ------------------------------------------------------- Haseko Corp. (1808) aims to reduce its groupwide liabilities to 734 billion yen within the current fiscal year. This is 24 billion yen less than the 758 billion yen debt that the condominium builder had promised to the financial institutions supporting its business restructuring. In the fiscal first half ended Sept. 30, creditors forgave 44 billion yen of Haseko's outstanding debt. The firm also received a capital injection of 39 billion yen from financial institutions. Additionally, the company used the proceeds from the sale of condominiums to repay loans. From March to September 1999, it reduced liabilities from 1.05 trillion yen to 922 billion yen. In the second half of the fiscal year, an additional 147 billion yen of debt is to be forgiven. (Nikkei 12-Jan-2000) ========= K O R E A ========= DAEWOO CORP.: Breakdown in restructure talks forecast ----------------------------------------------------- Korean authorities Tuesday, signaling that they will not support every unit of the troubled Daewoo Group, warned banks and other creditors to prepare for a breakdown in debt restructuring talks. The Financial Supervisory Commission chairman, Lee Hun Jai, told Hanvit Bank - which is heading Korean creditor talks on Daewoo Corp., the most indebted unit of Daewoo Group - that it must only support viable Daewoo businesses, said Kim Young Jae, a spokesman for the supervisory commission. "The key issue for Daewoo Corp. is whether it can win foreign creditors' support or not," said Mr. Kim. He said that Hanvit, as a main creditor, should prepare "step by step" for a possible collapse of talks between Korean and foreign creditors. Korean authorities Monday set up a team under the supervisory commission vice chairman, Lee Yong Keun, to minimize the economic impact of a Daewoo Corp. failure, and the unit is not to be discussed in a round of talks with Daewoo Group creditors scheduled for this week in Hong Kong and London. (The International Herald Tribune, South Korea Morning Post 12-Jan-2000) DAEWOO CORP.: Court control will lead to lawsuits ------------------------------------------------- The overseas banking community in Seoul said that Daewoo Group's over 200 foreign creditors will file lawsuits against all major operations of the group once the government decides to place Daewoo Corporation under court receivership. Warning the Korean government, a foreign banker yesterday said that any attempt to leave Daewoo Corp. under court receivership will disrupt the entire workout process of the group with most foreign banks taking legal proceedings against other Daewoo units. "Despite its earlier commitment, the Korean government is still saying that it is ready to put Daewoo Corp. under court supervision. Such action will mean a liquidation of the company since it will have no productive function without assistance from a parent company," he told The Korea Times. "Daewoo Corp.'s court receivership will lead to lawsuits from most foreign creditors of the group. It will disrupt the workout process of other major Daewoo units," he said, adding that the local government should not underestimate its impact. The foreign banker who has large exposures in the group said that as most of Daewoo Corp.'s foreign creditors have loans in other major units they will take hard-line options once they suffer huge hits from the court receivership. The most preferred option is to resolve the foreign debt issue without resorting to such radical measures like court control, the foreign banker said. The prospect of Daewoo's $5 billion foreign debt will become clear after the meeting between Daewoo's financial advisors and foreign creditors in Hong Kong and London, he added. Meantime, Lee Hun-jai, chairman of the Financial Supervisory Commission (FSC), said earlier yesterday that the government would use all possible measures to minimize the impact of the court receivership of Daewoo Corp. Lee said that the financial authorities will try to protect the interests of Daewoo's subcontractors under the prepackaged bankruptcy act once Daewoo Corp. receives court control. Lee was visiting the main office of Hanvit Bank, one of the major creditors of Daewoo. "When Daewoo Corp. is managed by court in the end, the government will try to use all available options to minimize the impacts on involved parties," Lee was quoted as saying by the FSC spokesman Kim Young-jae. "The government will make fair judgment on the performance of each company subject to court receivership. If a conclusion is reached that some companies stand no chance for survival, the government will not hesitate to shut them down," he was quoted as saying. The government last week formed a separate task force to deal with court receivership of Daewoo Corp. The new team was launched to prepare necessary procedures for Daewoo Corp.'s court-supervision. In a new approach toward rescheduling $5 billion foreign debt, the Korean government and Daewoo's financial advisors called for a meeting with foreign banks excluding those with exposures in Daewoo Corp. This strongly indicated that the government had considered more radical options like court supervision for Daewoo Corp. instead of negotiating with foreign creditors. After six month negotiation, the government offered a cash buyout proposal of 36 percent of Daewoo's $5 billion overseas debt, 2 percentage points higher than the previous offer, on Dec. 29, 1999. Earlier on Dec. 10, Daewoo's financial advisors sent a proposal, saying Seoul will pay cash for 34 percent of the total debt should overseas lenders agree to assume a 66 percent loss. Foreign creditors until now have not conceded any further from securing 59 percent of their money in Daewoo, assuming a 41 percent loss. (Korea Times 12-Jan-2000) DAEWOO GROUP: Redemptions not seen ailing Korean trusts ------------------------------------------------------- The Ministry of Finance and Economy said investment-trust companies won't face any liquidity problem in February when investors can redeem a larger portion of funds invested in Daewoo Group bonds. It made the comment in response to recent worries that investment-trust companies could face a liquidity crunch when investors are allowed to redeem 95% of funds invested in the bonds beginning Feb. 8, up from the current 80%. The investment-trust companies have secured substantial liquidity to meet the expected redemptions on Daewoo Group bonds next month, the ministry said after a meeting with officials at the Bank of Korea and Financial Supervisory Commission. The government's plan to inject funds into Korea Investment Trust Co. and Daehan Investment Trust Co.- The country's two largest investment-trust companies, together with state-run Korea Asset Management Corp.'s plan to purchase bonds, should also help investment-trust companies secure sufficient level of liquidity, the ministry said. Last November, the government unveiled the plans for increased liquidity and fund injection in order to help restore stability in local financial markets amid fears that the gradual widening of redemptions on Daewoo Group's bonds could cause a crisis. The local stock index shed a total of 10% of its value last Wednesday through Friday because of various factors, including fears that local investment-trust companies may dump their stocks to secure funds ahead of Feb. 8. Meanwhile, the government plans to provide a further one trillion won each to Korea Investment and Daehan Investment in the form of a loan this month as part of efforts to help them secure sufficient liquidity, the FSC said. Kamco is also expected to buy as much as 18.6 trillion won of Daewoo Group's bonds this month if such a request is made by investment-trust companies, said the FSC. On Monday, Kamco said it will issue 340 billion won ($298.8 million) of won-denominated asset-backed securities on Jan. 19. The securities will be issued on collateral of 365.6 billion won of bad loans at 53 companies that are under court receivership or court mediation, Kamco said. (The Asian Wall Street Journal 11-Jan-2000) DAEWOO MOTORS: Hyundai seeks ally for possible bid -------------------------------------------------- Hyundai Motor Co. said Tuesday that it was talking with overseas automakers about a possible joint bid for troubled Daewoo Motor Co. A spokesman for Hyundai Motor, Stephen Kitson, declined to name the companies, but General Motors Corp. and Ford Motor Co. have both expressed interest in making a bid for the auto arm of Daewoo Group, which is staggering under more than $70 billion of debt. DaimlerChrysler AG, reported to be studying debt-saddled Daewoo Motor, viewed the South Korean company as a risky deal, said Juergen Hubbert, a DaimlerChrysler management board member, on Monday. Hyundai's announcement of the possible joint bid for Daewoo Motor comes one day after the South Korean government said that it would allow South Korean companies to bid for Daewoo Motor if they formed an investors' group with foreign companies. Analysts said Hyundai's potential partner would most likely be Ford, and that the partnership might have more of a chance to succeed than one with GM. The government has scrapped its earlier position to hold exclusive talks with GM on the sale of Daewoo Motor, following opposition from labor organizations. A Hyundai-Ford joint bid scenario would be "more beneficial to the local automobile industry" in the long run, said Lim Chai Gu, an analyst at Kyobo Securities. A takeover by GM would probably result in more drastic business rationalization, such as firing more employees and eventually forcing more suppliers out of businesses. But analysts also said they thought that neither Ford nor Hyundai was truly interested in a joint deal to buy Daewoo Motor. "I don't think Ford and Hyundai are as serious about Daewoo Motor as GM is," said Ji Sung Chul, analyst at LG Securities. "Ford and Hyundai seem to be more interested in each other." Mr. Ji said that Daewoo Motor may not be valuable to Ford because an alliance with Hyundai would already provide what the U.S. automaker really wants - more access to Asian markets. "If Ford can tie up with Hyundai, why does it need Daewoo Motor, which has very little in common with the American firm?" Mr. Ji said. Industry sources said that General Motors had indicated it could pay between $5.3 billion and $6.2 billion for Daewoo Motor, burdened with 18.6 trillion won ($16.41 billion) in debt against 12.9 trillion won in assets. A spokesman for GM, the world's largest automaker, Tuesday urged Daewoo Motor's local creditors to decide soon on its month-old bid to buy the Korean automaker. "The clock is ticking," Rudy Schlais, president of GM's Asian operations, said in an interview at the North American International Auto Show in Detroit. The local creditors - many of them state-run banks - and the government need "to make a decision now." (The International Herald Tribune 12-Jan-2000) DAEWOO MOTORS: GM eyes Seoul for global base -------------------------------------------- General Motors would establish a global base for small and medium-sized cars in Korea with research and development functions if it succeeded in buying Daewoo Motor, a high-ranking GM official said. Rudy Schlais, in charge of GM's Asia-Pacific operations, told a press conference at the Detroit Motor Show that the US automaker had submitted a proposal to the Korean government to buy all Daewoo domestic passenger car businesses, including those of Ssangyong Motor. Daewoo's core capabilities would help GM's global strategies, he said. (Asia Pulse 11-Jan-2000) HANBO IRON & STEEL: Nabors consortium doing due diligence --------------------------------------------------------- A team of officials from United States-based Nabors consortium is looking over accounting documents and production facilities of bankrupt Hanbo Iron and Steel in Tangjin, South Chungchong province, industry sources said. The Nabors inspection team, which arrived in Korea over the weekend, will complete its audit by the end of the month, they said. The consortium is composed of Nabors Capital, Third Avenue Capital and UNX Capital. Kwon Ho-sung, president of UNX Capital, said last month that negotiations had taken place in New York with the committee overseeing the sale of Hanbo Iron and Steel. The sell-off committee is composed of Korea First, Korea Exchange, and Deutsche banks and the law firm of Woo Bang. Kwon said the U.S. consortium agreed to pay a lump sum by the end of next month in exchange for management control of Hanbo Iron and Steel. Although a sale price for the bankrupt steelmaker has not been announced, sources quoted $500 million as a possible price. The Nabors consortium and creditors of Hanbo are currently reviewing a 1,000-page sales contract. However, Korean steel manufacturers said the $500 million price tag is far less than the amount Hanbo owes its lenders. In addition, steelmakers here said the Nabors consortium, composed of financial institutions, may not be suited to run a steel plant. (Korea Herald 13-Jan-2000) JOSUN LIFE INS.: Hyundai to acquire troubled company ---------------------------------------------------- The Financial Supervisory Commission (FSC) said yesterday that it has signed a final deal to sell ailing Josun Life Insurance Co. to the Hyundai Group in a merger-and- acquisition (M&A) scheme. Under the agreement, the government will inject 116.6 trillion won into Josun Life through state-run Korea Deposit Insurance Corp. to cover the insurer's net asset shortages, while the conglomerate will kick in an additional 17.3 trillion won into Josun Life for a complete takeover on Friday. The deal will make Josun Life the first among six nationalized life insurers to be sold to foreign or local buyers. The Korean government nationalized the insurer last year by injecting 99.3 billion won into the distressed company. Hyundai will simultaneously acquire Hankuk Life Insurance Co. after recapitalizing it. (Korea Herald 13- Jan-2000) SAMSUNG MOTORS: Renault wants acquisition done in 90 days --------------------------------------------------------- France's Renault SA aims to conclude a deal to acquire Samsung Motors within 2-3 months, the company chairman said Tuesday. "We have given ourselves two or three months whether or not to reach an understanding," Renault Chairman Louis Schweitzer said during a news conference at the North American International Auto Show in Detroit. "We feel the only way to get into the Korean market is to be a Korean manufacturer," he said, adding, however, that "the price we'd be willing to pay wouldn't be unlimited." The French carmaker entered into exclusive negotiations with Samsung's Korean creditors to acquire its assets on Dec. 30. Established in 1995, Samsung Motors has been producing cars using technology provided by Japan's Nissan Motor Co., in which the French automaker has acquired a controlling stake last year. Schweitzer said Renault was the preferred partner for Samsung Motors partly because of its alliance with Nissan. "Renault can use the existing plant and make use of the Nissan equipment," he said. By taking over Samsung, Renault expects it will be able to capture about 10 percent of the Korean auto market, where approximately one million units are sold each year. Meanwhile, DaimlerChrysler, the world's fourth-largest automaker, said it is in the process of forging a strategic alliance with a Korean automaker to be announced soon, according to Yonhap News Agency. Executive Vice President Theodor Cunningham said his company is considering participation in the auction for Daewoo Motors. Cunningham, in charge of global sales and marketing for DaimlerChrysler, said it is necessary to forge a technological and marketing tie-up with a Korean partner for the globalization of DaimlerChrysler's operations, which will be announced shortly. He declined to answer when asked if the potential partner is Hyundai Motors. Daewoo, affiliate Ssangyong Motors, and Samsung Motors are up for sale, and Kia Motors has been taken over by Hyundai Motors, leaving only Hyundai as a candidate for a strategic partner. As such, Ford Motors is also rumored to have interest in forging ties with Hyundai to take part in the bidding for Daewoo. Chrysler and Hyundai talked about a marketing tie-up in the 1980s, which would have had the U.S. firm selling Hyundai cars in the United States, but Hyundai backed out of the three-year negotiations. Cunningham said his company will consider taking part in the bidding for Daewoo as long as it is within DaimlerChrysler's best interests. (Korea Herald 13-Jan-2000) =============== M A L A Y S I A =============== MALAYSIAN AIRLINE SYSTEM: Shares rise on debt workout talk ---------------------------------------------------------- Shares of Malaysian Airline System (MAS) have surged as speculation mounted that the carrier would announce a debt restructuring plan with KLM/Royal Dutch Airlines as a key stakeholder. MAS shares closed yesterday up 42 cents at M$3.76 (about HK$7.67), after hitting a high of $3.80 earlier. "I heard MAS has got a debt restructuring plan out," a dealer said. "They are looking for buyers to help settle their debts." Analysts said a foreign airline might take a stake in MAS, saying a recent tie-up between Singapore Airlines and Virgin Atlantic Airways had put MAS under tremendous pressure. "There's speculation that KLM may take a stake in MAS," a researcher said. MAS chairman Tajudin Ramli said last week that the firm was exploring the possibility of joining a global alliance. An MAS spokesman denied the rumours of a debt restructuring involving KLM. KLM declined to comment. Last month, SIA signed a memorandum of understanding to buy 49 per cent of Virgin Atlantic for S$1.62 billion (about HK$7.58 billion), including a capital injection of S$132 million. That deal likely meant Virgin would not renew its 10-year code-share pact with MAS once it expires in May 2005, forcing MAS to seek other options, analysts said. MAS is said to be interested in joining an alliance linking KLM, Northwest Airlines and Italy's Alitalia, and that could mean one of the parties buying a stake in Malaysia's flagship carrier. "I wouldn't be surprised that the alliance offers to come in," an industry analyst said. "KLM and Northwest have been named. KLM is more likely though." Analysts said the emergence of a foreign stakeholder would help MAS resolve its debt problems. Last year, MAS made M$864.8 million from the disposal of seven Boeing 777-200s and three 737-500s on sale and leaseback arrangements, allowing it to clear some short-term debts. However, its ability to repay long-term debt of about MS$9.9 billion, as estimated at the end of September, has been a concern for investors. (South China Morning Post 12-Jan-2000) TA BANK: Sale of ailing Malaysian bank approved in Manila --------------------------------------------------------- Philippine monetary authorities had approved the sale of a distressed Malaysian bank following successful negotiations with a buyer, a central bank official said. Central Bank deputy governor Alberto Reyes said the deal involved the sale of the TA Bank to the Manila Bank (MB), but they declined to reveal the price, pending the signing of the purchase agreement. The TA Bank, one of Manila's commercial banks, is part of the Kuala Lumpur-based TA Group which has ventured into diversified financial services here including stock broking. (Asia Pulse 11-Jan- 2000) ===================== P H I L I P P I N E S ===================== BW RESOURCES CORP.: Stock market darling no more ------------------------------------------------ Last year's darling may turn out to be this year's dud, as Gaming firm BW Resources Corp. (BW) plunged to new depths yesterday weighed by stock market rumors. In a statement to the Philippine Stock Exchange (PSE) yesterday, BW blamed "false rumors and negative publicity" for the steep drop in its stock price. The stock was suspended from trading last Monday having touched its floor limit at 12.75 Philippine pesos (PhP) per share. The PSE resumed trading for BW at 10 a.m. yesterday after the company explained it was "still unsure of the reasons for the abrupt drop" in its price. Investors dumped BW anew as it fell to another day-low yesterday, touching its floor price for the second time, just eight minutes after it resumed trades. The PSE however did not halt trading for BW, citing a rule that it did not maintain its floor price at the end of the market session. BW fell to a day low of PhP7.70 per share but was able to regain footing at the close of trade. It dropped 11.76% or PhP1.50 to close at PhP11.25 apiece. The PSE cited a provision in rules on trading irregularities that said "if the price of the issue closes below the ceiling or above the floor price, no trading halt shall be ordered by the exchange on the following day but the unusual price movements shall still be investigated." PSE halts trading for stocks which drop 40% or climb 50% in a given day. "We however think that false rumors and negative publicity, including rumors that were reported in the media but subsequently denied and proven wrong by the PSE that there had been a failed trade or a client of a stock brokerage firm have defaulted in his or her payment for stocks ... worth PhP45 million (US$1.1 million at PhP40.477:US$1) are the primary reasons for the drop in price of BW shares," Jose Salvador M. Rivera, Jr. corporate secretary at BW, wrote. "It's the old pump and dump, an old stock market trick. After the hype is over, people sell the stock down. It has no more stories to tell," a trader, requesting anonymity, said. Stories of "uncollected checks" further fanned jitters from floor talk that supporters of the stock led by businessman Dante Tan are no longer equipped to support the price. This, however, contradicted with another rumor that Mr. Tan bought holding firm Megaworld Corp.'s BW shares. Last year, BW swapped 1.2 billion worth of shares with Megaworld to develop a property located along the Manila Bay area into a hotel-residential and commercial project. A source at BW said it is not possible for Mr. Tan to buy the Megaworld shares since the agreement includes a lockup period on the shares for one year. This disallows the holder of the shares from selling. Mr. Tan was not immediately available for comment. "I think it was 'kiting,' since there is no new money coming in although we've heard of new money to come in which may have accounted for the rise in the stock towards the close," an analyst at a local brokerage firm said of BW's last minute recovery yesterday. "Kiting is when a broker buys say 100 shares at PhP31 and then after four days, to take advantage of the four day settlement, another broker buys the same shares. No new money just transfer of shares which could be done to support the price," the trader explained. Meanwhile, market sources pointed to an unexpected turn. A foreign investor is said to be keen on wrestling control of online bingo firm Best World Gaming Entertainment Corp. of Mr. Tan from majority shareholders at PhP5 per share. BW has been negotiating to acquire BWGE after it recently gained approval from its shareholders last month to push through with the investment. (Business World 12-Jan-2000) METRO PACIFIC: Delisting, restructuring possible ------------------------------------------------ First Pacific may privatise Metro Pacific and restructure the 82 per cent-owned Philippine subsidiary into a pure property play, according to chief operating officer Michael Healy. Metro Pacific owns nearly 8 per cent of Philippine Long Distance Telephone (PLDT), 66 per cent of Bonifacio Land and also some consumer businesses. According to stock market rumours in Manila, First Pacific wants to delist Metro Pacific from the Philippine stock exchange in an exercise to gain control of PLDT. First Pacific directly owns about 15 per cent of PLDT. Another option to unlock the property value of Metro Pacific would be to list Fort Bonifacio, analysts said. But as property companies were not receptive at present to Manila investors, Mr Healy said, the company would not list Fort Bonifacio this year. "There is no point in listing Fort Bonifacio and Metro Pacific together," Mr Healy said. He added that First Pacific was counting on the prospects of the company's PLDT stake, as well as its 40 per cent holding in Indofood purchased last year. PLDT made good progress after First Pacific took over management, he said, while Indofood generated a free cash flow of US$400 million. First Pacific could also make further investments or disposals to bolster its telecommunications and consumer businesses, he said. Meanwhile, Mr Healy said First Pacific was aware that a 9 per cent stake in the company held by Indonesia-based Salem Group - its largest shareholder - was pledged to Indonesian Bank Restructuring Agency (Ibra) and would be put up for sale this year. The stake includes 4.9 per cent that Ibra owns and a 4.1 per cent holding that Salem has pledged to Ibra. These stakes are worth about US$200 million. Mr Healy said a buy-back plan for these holdings had not been proposed to First Pacific's board, but he did not rule out such a move. "We have not bought back a share in the past two years," he said. "But the stock seemed under valued." He said the net-asset value per share of First Pacific was estimated at HK$6.50 to $7, a deep discount to its share price. First Pacific shares ended yesterday unchanged at HK$5.60. The company has about US$100 million in cash, and a 30-35 per cent gearing ratio. (South China Morning Post 12-Jan-2000) PHILIPPINE NAT.BANK: Nationalization temporarily ceased ------------------------------------------------------- The government temporarily suspended yesterday the scheduled full privatization of the Philippine National Bank (PNB), citing the need to conduct a further review of the sale. But it will push through with the sale of five other government assets, Finance Secretary Jose T. Pardo said. "We will have to study that (PNB sale) first," Pardo told reporters yesterday. Pardo's decision contrasted from the position of his predecessor Edgardo B. Espiritu who actively pursuing the total divestment of the government's remaining 30 percent stake in PNB as scheduled by March this year. He did not say how long the study will take considering that full government divestment from PNB forms part of commitments made to the World Bank and the International Monetary Fund under the banking sector reform program. The government had committed to the IMF the full privatization of PNB not later than June this year. Lehman Brothers and Price Waterhouse, both US-based investment bankers, have already been tapped as financial advisors to the sale. Pardo admitted the market is "in a buying mood" but decided to suspend PNB's planned sale just the same as part of a broader sale review program. He also admitted the government has to work fast considering that the Asset Privatization Trust, government's asset disposal arm, will be dissolved by yearend. Pardo did not disclose which five assets will be sold as scheduled this year, saying only the government needs to be "selective." "The market is hungry but it will not just accept any sale. The market will decide," Pardo said. Earlier, Philippine Airlines chairman Lucio Tan acquired a 35-percent stake in PNB and expressed interest in bidding for the government's remaining 30 percent stake. Although critics said Tan's entry in PNB might scare away potential foreign strategic investors in the state-owned bank, his acquisition was backed by the Bangko Sentral ng Pilipinas. Analysts said Tan would likely merge PNB with his Allied Banking Corp. if he successfully acquires the government stake to add to his 35 percent holdings. One of the assets to be privatized this year will likely include the Manila Electric Co. (Meralco) where the government still has a 23 percent equity. But even the planned sale of government shares in Meralco - expected to raise at least P4 billion - will require additional work. The Lopez group said the government cannot sell its stake in the utility firm in a single block unless the company's by-laws are amended. Meralco's by-laws state that no single shareholder other than Lopez-owned First Philippine Holdings Inc. can own more than 10 percent equity. The government has said it wants a block sale of its Meralco shares to fetch a higher premium. A total 33 percent equity is owned both by the government itself and by government financial institutions, finance officials said. Under the plan devised by Espiritu, a five- or seven-year convertible bond issuance can raise $250 million for the government and retain effective control over the shares. It will also raise around P10 billion from privatization, of which P6 billion will fund this year's deficit while P4 billion will fund a rehabilitation program for the Pasig river. (Manila Times 12-Jan-2000) PILIPINO TELEPHONE CORP.: To finish restructure this month ---------------------------------------------------------- The beleaguered Pilipino Telephone Corp. (Piltel) is bent on completing the restructuring of 34.9 billion Philippine pesos (US$862.2 million at PhP40.477:US$1) in obligations by January 31. In a telephone interview, Piltel investor relations manager Deborah Anne N. Tan said the company is optimistic it will finish the restructuring by the end of the month. "As far as I know, the documents we have for the review of bondholders are already in its final stages and talks with Marubeni are progressing," Ms. Tan told BusinessWorld. She, however, failed to provide further information, particularly on discussions of management with Marubeni. She added that talks with the Japanese supplier were mostly on the senior-management level. Piltel incurred PhP34.9 billion in debts from three sources: banks, bondholders and Marubeni largely due to the aggressive expansion in cellular facilities. The Japanese supplier installed Piltel's 400,000 landline obligations in Mindanao. Last October, Piltel -- with parent firm Philippine Long Distance Telephone Co. (PLDT) -- signed a memorandum of understanding (MoU) with creditor-banks. The MoU has laid out the principal terms that will provide the framework for the formalization of Piltel's debt restructuring. Although Piltel still has to work on repayment of its debts after restructuring, Ms. Tan earlier told BusinessWorld that it will at least provide more favorable terms for the company. She also added that once debts restructured, it will ease the company's cash flow and assist the implementation of recovery programs. The MoU, likewise, will set the tone for the company's negotiations with bondholders and Marubeni. Telecommunications industry analysts said Piltel management will strive for the completion of debt restructuring the soonest time possible since the partnership of parent firm, PLDT with Japanese counterpart, Nippon Telegraph and Telephone Corp.'s fully-owned subsidiary, NTT Communications Corp. (NTT) is hinged on the cellular company's restructuring deal. "Completion of Piltel's debt restructuring is one of the conditions of the closing of the PLDT-NTT deal," said ATR- Kim Eng Securities, Inc. assistant vice-president and deputy head for research Richard R. Tan. PLDT president and chief executive officer Manuel V. Pangilinan earlier said the much-awaited partnership with NTT and its capital infusion of PhP14.7 billion ($363 million) as well as the acquisition of cellular firm Smart Communications, Inc. hinge on conditions which must be met by the first quarter of the year. One condition is for Piltel to finalize terms with principal creditors on the restructuring of its debts. Mr. Pangilinan said the Japanese investor is particularly sensitive about Piltel's debt restructuring. Other conditions are the regulatory approvals of PLDT's acquisition of Smart and the operational integration its subsidiaries. "I believe NTT is just concerned, just as anybody is concerned with Piltel's situation," said Ms. Tan. NTT, after swapped Smart shares and additional PLDT subscription are finalized, will hold 15% stake in the telephone giant. Unicapital Securities, Inc. research manager Ricardo Lorayes said now that NTT is a significant shareholder of PLDT, it will not be difficult for Piltel to discuss restructuring terms with Marubeni. "Marubeni and NTT are both Japanese companies so it is expected that Marubeni will look kindlier to the restructuring," said Mr. Lorayes. Piltel last week was a top gainer terms of volume of shares in the stock market rising 30 centavos to PhP1.42, leading to market speculations that the company has already finalized agreement with its creditors. Piltel's Tan brushed off speculations and said the rising of the cellular company's stock prices can be attributed to the rising of stock prices of supplier Qualcomm, Inc. in the US. (Business World 12-Jan-2000) SMI FISH INDUSTRIES: Losses spur stake sale to investors -------------------------------------------------------- Four Japanese investors recently bought an 80% stake in cash-strapped SMI Fish Industries, Inc., one of the country's largest exporters of processed seafood products. A company official, who requested anonymity, said the SMI management decided to sell the 80% stake to new investors last December 18 after suffering heavy losses brought about by the 1997 financial crisis. The source told BusinessWorld the four new Japanese investors, represented by lawyer Juan H. T. Valeroso, bought the 80% stake for an estimated 478 million Philippine pesos (US$11.8 million at PhP40.477:US$1), which approximates SMI's total liabilities. "The agreement involves the investors' assumption of our total liabilities which amount to about PhP478 million," the company official said in a telephone interview last week. This amount is broken down into SMI's PhP398 million debt to creditor banks and another PhP80 million, which it owes to suppliers. The company official said SMI's management and the Japanese investors have yet to sign an agreement formalizing the buy-in since the document is still being finalized. "There was already an assignment of shares of stock but the memorandum of agreement has not been signed yet," the source said. "The block of shares are named after Atty. Valeroso who will distribute it among the four Japanese investors." The source said all existing stockholders -- except Rosalinda R. Santero, who is one of the company's board members -- divested their shares in the company. Ms. Santero, who retained her 20% stake in the firm is the wife of SMI president Amado C. Santero, Jr., who sold his entire 45% stake. The source could not name their new owners, saying that a formal meeting with the investors has yet to be arranged. Mr. Valeroso was not immediately available for comment. The source said they were still unaware how the new investors will skirt the Constitutional requirement which limits foreign ownership in firms operating in the country. "Although their Filipino representative (Mr. Valeroso) might opt to buy part of the stake of the new investors," the source pointed out. A provision in the Philippine Constitution allows foreign investors to own a maximum of 40% stake in companies operating in the country. The buy-in was consummated a day after the company suspended operations last December 17, triggering reports that SMI had already closed down because of heavy losses. (Business World 12-Jan-2000) =============== T H A I L A N D =============== KGI SECURITIES ONE: Denies capital reduction rumors --------------------------------------------------- KGI Securities One (S-ONE) Executive Chairman Pakhawat Kovithvathanaphong yesterday denied widespread rumors that his company is planning to reduce registered capital as a result of accumulated loss of over 8 billion baht as at the end of the third quarter last year. In an urgently called press conference, Pakhawat said that the company, which is looking forward to becoming a leading brokerage house in Asia, has capital of 5.323 billion baht which is enough for business operations. The reported loss was only in accounting terms, and the company is maintaining 100 percent of the required NCR (net capital rule) amount set by the Office of the Securities Exchange Commission... Pakhawat said. He added that the rumors of the registered capital reduction had produced an adverse impact to the company share price. Despite an official denial of the rumors and a statement to the Stock Exchange of Thailand (SET), the share price of S- One fell on Friday by eight percent to 4.1 baht per share. Earlier, ABN AMRO Asia Securities released its analysis on January 7, saying that there was a possibility for S-ONE to decrease its registered capital as it had suffered an accumulated loss of 8.1 billion baht which would need at least ten years to write off, assuming that the company could earn 700-800 million baht per year. ABN also said that in the fourth quarter of 1999 , S-ONE's earnings would decline and the company anticipated profit would stand at only 17 million baht, or about 0.1 baht per share. (Business Day 12-Jan-2000) PADAENG INDUSTRY: Close to acquring new partner ----------------------------------------------- Padaeng Industry Plc says it is close to finding a new partner to replace Western Metals, which last year abandoned plans to buy an additional 32% stake in the Thai zinc mining company. While declining to name the potential partner, Padaeng's president and chief executive, Pinit Vongmasa, said a contract would probably be signed within three months. "We need a partner to improve our financial position, support our production and marketing and expand our business," he said yesterday. Cash-strapped Padaeng earlier hoped that Western Metals, an Australian mining firm, would increase its shareholding, providing funds to pay outstanding debt of 3.4 billion baht. In October, 1998 Western Metals agreed to buy 81.6 million shares at 14 baht each. However, it pulled out of the purchase after paying 91.43 million baht for 6.5 million shares, retaining a stake of 4.33%. As a result, Padaeng stopped paying debt and renegotiated terms with its nine creditors, who agreed to defer repayment of an initial 1.14 billion until Sept 15 this year. (Bangkok Post 12-Jan-2000) THAI AIRWAYS INT'L.: Debt clouds its skies ------------------------------------------ Thai Airways International's planned sale of 300 million new shares to the public in June is expected to boost company growth. However, analysts also warn that the national carrier's mixed fleet, comprised of too many different makes, and towering debt pose investment risks. "THAI is very profitable despite being lowly rated for service and efficiency," said Vikas Kawatra, senior analyst at Paribas in Bangkok. The airline increased its consolidated net profit in the fiscal year ending September 1999 by 35.1% to 5.31 billion baht from 3.93 billion in the previous year. Its total revenue rose to 112 billion baht from 109 billion. The proposed sale of 300 million new shares awaits approval from the Finance Ministry. The group of consultants drafting the plan for the sale comprises Credit Suisse First Boston (Singapore), Kleinwort Benson, and two local firms, Jardine Fleming Thanakom Securities and Asset Plus Securities. However, THAI was saddled with a variety of aircraft, engines and parts, resulting in huge costs for maintenance, training and inventories, said Timothy Ross, a regional airline analyst at SBC Warburg Dillon Read. THAI used to have as many as 10 types of aircraft. By comparison, Singapore Airlines and Cathay Pacific have three or four. Although THAI needed a mix of aircraft for its long- and short-haul flights, including domestic routes, it still had too many types, he said. Analysts said that if its fleet was concentrated around a few models, it would be more cost-effective in terms of maintenance, spare parts, and even volume discounts on supplies. THAI had begun to address the issue in the last few years, Mr Ross said. Since 1992, the airline had reduced the types of aircraft in service to seven from 14. Even so, analysts said THAI's debt remained high, draining cashflow. The airline had net debt of 95.47 billion baht, and a foreign-exchange loss on the debt of 5.52 billion baht as of last September. The forex debt was about 70% in US dollars and 20% in yen. However, the government's plan to sell a 23% stake in THAI to a strategic partner this year, apart from the public share issue, is expected to raise the company's profitability. The main objective of the public share sale was to shore up THAI's balance sheet and improve liquidity ahead of finding a strategic partner, Mr Kawatra said. "THAI has tremendous scope for improvement," he said. However, a 23% stake in the company would not entitle an investor to revamp operations entirely. In any case, small improvements in THAI's operation could generate better returns, Mr Kawatra said. The Finance Ministry holds a 93% stake, or 1.3 billion shares, in THAI. The government says it plans to reduce its stake to just below 50%, with the balance held by a strategic investor and the public. Among the international airlines interested in THAI are British Airways, Qantas and Singapore Airlines. "Geographically, Thailand is a natural tourist trap and has plenty of potential in terms of regional hub development," Mr Ross said. According to the Tourism Authority of Thailand (TAT), tourist arrivals this year are expected to increase by 7.3%, to 8.8 million, compared with last year. Mr Kawatra said the airline's passenger load was expected to remain high, contributing between 70% and 72% of THAI's revenue. The fear of rising fuel costs affecting profit margins was minimal because oil accounted for less than 13% of total cash costs, Mr Kawatra said. THAI's shares closed at 52.50 baht yesterday, with analysts saying it was valued fairly. Mr Ross said there was a "modest amount of upside for this stock." (Bangkok Post 12-Jan-2000) THAI AMARIT BREWERY CO.: KTB seeks rehab for debts -------------------------------------------------- State-owned Krung Thai Bank has filed a lawsuit seeking permission to rehabilitate the business of Thai Amarit Brewery Co, which owes the bank more than three billion baht. The bank told the Central Bankruptcy Court that Thai Amarit, brewer of Kloster beer, had total debts of 3.27 billion baht, of which 3.08 billion baht was owed to the bank alone. The bank said it considered the company's business fundamentals still very strong, and that it could return to profit if the economy recovered and Thai Amarit's debts and business were restructured. The court set down the first hearing for Feb 7. (Bangkok Post 12-Jan-2000) THAI OIL CO.: Expects to wrap restructuring up by March ------------------------------------------------------- Thai Oil Co. disclosed its future plans yesterday after announcing that it expects to wrap up its debt restructuring process by March. Pichai Chunhavajira, the Petroleum Authority of Thailand (PTT) Deputy Governor, announced plans for Thaioil which includes selling part of its stake in Thai Paracylene (TP), Thaioil Power (TOP) and Thai Carbon Production (TCP). The construction of the Thai Paracylene plant was disrupted in late 1998 due to lack of funds. Pichai said the company plans to resume the remaining 30 percent of the construction after selling 13 percent stake to Mitsu Oil, which currently controls 38 percent. Following the deal, Thaioil will assume 51 percent control while Mitsu Oil holds the rest. The proceeds from the sale will then be used to finance the construction. In addition, Thaioil plans to sell 26 percent of its stake in TOP, an independent power producer, to PTT after the debt reform plan has been completed. Moreover, Thaioil is looking to shed some of its stake in TCP, but the amount was not disclosed. Meanwhile, Chulchit Bunyaketu, Thaioil Managing Director, said future ties between the company and the PTT - Thaioil's parent company -- is still uncertain, depending upon the outcome of PTT's privatization. He said Thaioil's creditors might swap their debt to equity in the new privatized company. However, the process is not part of the debt restructuring scheme. Thaioil expects to finalize the debt restructuring plan through the Central Bankruptcy Court by the end of March. Yesterday the court appointed Vipawadee Planner to draft the business reorganization plan for Thaioil. The court is due to give its judgment of the plan by March 20. The debt reform plan includes raising the capital and creditors' swapping of US$400 debt to equity. Also, Thaioil agreed to pay US$315 to creditors who do not wish to swap. (Business Day 12-Jan-2000) THAI OIL CO.: Debt revamp set to reduce NPL total ------------------------------------------------- Thai Oil Co Ltd's successful debt-restructuring agreement with its 124 creditors will reduce non-performing loans (NPLs) in the Thai financial system by US$407.7 million, or around Bt16 billion. Sivaporn Dardarananda, vice chairman of the Corporate Debt Restructuring Advisory Committee (CDRAC), said yesterday that the Central Bankruptcy Court has received the creditors' petition on the oil company's debt-restructuring plan on Monday. The court's approval has effectively prevented other creditors from taking legal action against the firm, according to Thaioil managing director Chulchit Bunyaketu. The financially ailing oil company owes a total of US$2.26 billion to both local and foreign banks. As of end- November last year, according to the Bank of Thailand, NPLs in the local financial system totalled Bt2.36 trillion or 42.27 per cent of total loans. Of this, Bt1.1 trillion or 36.37 per cent belonged to privately-owned commercial banks, while Bt1.08 trillion or 64.10 per cent was owed to nationalised banks and finance companies. Bunyakiat said in a briefing on the progress of the company's debt-restructuring that he expects such a plan to be completed as per the court procedure by late March or early April. The Petroleum Authority of Thailand (PTT), a major shareholder of Thai Oil, and its creditors are scheduled to complete all agreements concerning the debt-restructuring plan before Jan 26. In addition, creditors are required to submit documents relating to the debt repayment to the court between Jan 13 to Feb 14. They are also required to report their consensus to the court not later than March 13. On March 20, the court will rule whether it approves or turns down the plan. Thai Oil is saddled with a mountain of bad debts since the central bank terminated the country's 13-year-old fixed exchange rate regime following periodic attacks on the Thai currency. The de-facto baht devaluation had resulted in a substantial rise in the company's debts since then. Persistent financial troubles made it difficult for the company to honour its debt obligations in Nov 1998. The Industrial Finance Corporation of Thailand (IFCT), one of its major local creditors, has been successful in bringing all related parties to the negotiation table. Creditors have reassured that there would be no change in the company's debt-restructuring plan despite a major fire at Thai Oil's Sriracha plant a couple of months ago. PTT, one of Thai Oil's creditors, injected $250 million in fresh capital into the company. The new capital injection, including debt-to-equity conversion, has helped raise PTT's stake to 49.99 per cent. Other creditors have also converted $250 million debt into equity, raising their overall stake to 49.99 per cent. For the merger plan with PTT, Chulchit said that it largely depends on PTT's privatisation plan which is expected to be completed before the year-end. "We have no problem about the merger as we have cut operating costs by reducing staff from 1,034 to 700 workers," he added. (The Nation, Bangkok Post 12-Jan-2000) THAI PETROCHEMICAL INDUS.: Irked by restructure fine print ---------------------------------------------------------- TPI says fine print details of the proposed US$3.4 billion debt restructuring plan could easily lead TPI to be taken over by its creditors, Krungthep Turakij reported, quoting Prachai Leopairat, chairman of the managing board of TPI. He was quoted as saying that completion of the debt restructuring will be done before the 17th of this month. (Business Day 12-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. 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