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/raid1/www/Hosts/bankrupt/TCRAP_Public/000207.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, February 7, 2000, Vol. 3, No. 26 Headlines * C H I N A & H O N G K O N G * HOPEWELL HOLDINGS: Long-term credit rating downgraded * I N D O N E S I A * ASTRA INT'L: IBRA opens 2nd bidding for its 45% stake PT BAKRIE SUMATRA PLANTATIONS: Loses on Lewis & Peat fold PT BANK CENTRAL ASIA: Ibra to chase assets of bank owners * J A P A N * NISSAN DIESEL MOTOR: To issue securities, get fresh credit NISSAN MOTOR CO.: Pushes forward with restructure plans NKK GROUP: To cut 4,000 jobs, debts in process TAIYO VINYL CORP.: Speeding up restructuring * K O R E A * DAEWOO MOTOR CO.: Requests for proposals go out this week KOOKMIN LIFE INS.: Initial bidding to begin this week * M A L A Y S I A * AVENUE ASSETS BHD: To reducing debt burden via sale LAND & GENERAL: Aims to finalise debt revamp scheme soon * P H I L I P P I N E S * MONDRAGON INT'L PHILIPPINES: Banks start asset-acquisition NATIONAL STEEL CORP.: Gov't asks Spanish group to invest UNIWIDE GROUP: Investors' entry hinges on debt rehab UNIWIDE GROUP: Creditor bucks sale of subsidiary Paragon VICTORIAS MILLING CO.: Two sugar millers in bidding * T H A I L A N D * ASIA FINANCE SYNDICATE: Lawsuits could to block repayment ATEC COMPUTER: Loses court battle over illegal software BAN CHANG PLC: Facing bankruptcy after creditor sues BANGKOK BANK: To stay in red this year BANGKOK METROPOLITAN BANK: Ex-execs criminally charged SSP GROUP: Plans to focus solely on steel production SSP GROUP: Somsak seeks deal with HEI VANACHI GROUP: Reports debt-rehab progress to SET ============================== C H I N A & H O N G K O N G ============================== HOPEWELL HOLDINGS: Long-term credit rating downgraded ----------------------------------------------------- Standard & Poor's (S&P) has cut its long-term corporate credit rating on Hopewell Holdings and maintained a negative outlook on the company, citing weak operating results and low internal liquidity. The company operates the Guangzhou-Shenzhen Superhighway. The ratings agency also lowered its rating on US$600 million in Hopewell unsecured senior notes, which are due in 2004 and 2007. Hopewell chairman Sir Gordon Wu Ying- sheung said he was not concerned by the rating announcement. "Standard & Poor's decision reflects purely short-term considerations," he said. "Hong Kong is now on the road to recovery, and we can also look forward to China's forthcoming entry to the WTO which will further boost economic activity. Our cash flows will increase dramatically when the superhighway project loan is totally repaid." Both sets of ratings were reduced from BB to BB minus, while the ratings on the notes were removed from CreditWatch with negative implications and the notes' outlook was revised to negative. S&P said Hopewell's downgrade reflected weak operating results, low internal liquidity, continued capital expenditure and GS Superhighway's interest obligations. It said the cash from the company's operations in 1999 was insufficient to cover scheduled interest repayments and its available cash balance continued to decline over the past year. Hopewell's commitment to develop its mainland infrastructure portfolio had also stretched its financial resources to capacity, it said. The agency expressed concern Hopewell's obligation to cover the interest payments on the GS Superhighway could be extended beyond 2002 if the yuan was devalued or the toll road under- performed for any reason. "Weaker than anticipated toll-road performance would reduce projected cash flow. This would also prolong the GS Superhighway's reliance on Hopewell for interest payments," it said. However, the agency said traffic growth on the Superhighway was expected to remain robust and the venture also had an experienced management team. "Strong traffic growth over the foreseeable future and a planned 15 per cent toll increase on the superhighway in 2001 are expected to lend stability to Hopewell's financial performance," the agency said. Sir Gordon said that given an expected improvement after 2002 - the year the project-level bank debt on the superhighway is repaid - holders of the $600 million unsecured senior notes should feel very secure in their investment. "S&P's negative outlook relates to the continuation of the economic recovery and Hopewell does not share those concerns," he said. He said Hopewell had recently secured a Bank of China guarantee to replace an earlier arrangement with the collapsed Guangdong International Trust and Investment Corp for a shortfall guarantee facility covering the highway. (South China Morning Post 04-Feb-2000) ================= I N D O N E S I A ================= ASTRA INT'L: IBRA opens 2nd bidding for its 45% stake ----------------------------------------------------- The Indonesian Bank Restructuring Agency (IBRA) opened on Friday the second round of bidding for its 45 percent stake in publicly listed auto giant PT Astra International. IBRA chairman Cacuk Sudarijanto said that the agency expected to be able to make a short list of between three to five quality investors on Feb. 23, and to close the sale on March 25. "They will have to submit their final bids on March 20, and we'll choose the investor on March 25. This is the deadline for the money to go into the government coffers to help finance the current state budget," Cacuk told reporters at a press conference. Separately, President Abdurrahman Wahid said in Bonn, Germany, that the agency must sell its Astra portfolio immediately. "I demand that (Astra) be sold immediately to the highest price bid," he said during a gathering with German businessmen. Abdurrahman has been on a two-week international tour since last week. IBRA is targeted to raise some Rp 17 trillion in the current fiscal year ending March 31. The agency has so far raised more than Rp 12 trillion through asset sales and loan recovery. IBRA has earlier said that it expects to raise at least Rp 2 trillion from the Astra sale. Cacuk expected the agency to sell the Astra shares at around Rp 4,000 each. IBRA initially owned a 40 percent stake in Astra. But Cacuk said that he was informed by his staff on Thursday that they actually control 45 percent or about 1.04 billion shares, which were traded late on Thursday at Rp 3,700, up Rp 100 from the previous day's close. "The other 2 percent is still being pledged (by IBRA's debtors) to other parties. I won't mention names," he said. IBRA received the Astra shares from several powerful businessmen to repay the debts of their banks to the government. Asked if IBRA would sell all of its 45 percent stake, he said: "Yes, all of it." The Astra sale has been plagued by controversy. IBRA initially appointed a consortium of investors led by U.S. Newbridge Capital and Gilbert Global Equity Partners as the preferred bidder for Astra with a floor price of Rp 3,750 per share. But after a row with Astra's Rini Soewandi-led management team, IBRA announced earlier this week that its exclusive agreement with the Newbridge/Gilbert consortium had expired since the consortium failed to provide a 30 percent down payment by the Monday deadline. "The bid is now open to other investors, and I'm optimistic that there will be more interested parties," Cacuk said, dismissing concerns that the failure with the Newbridge/Gilbert consortium would discourage other investors. He said during a presentation this week in London that many investors have expressed their interest in Astra. Cacuk acknowledged that more than 30 investors have already applied to the agency to join the bidding for Astra. "But we want a quality investor," he said. France-based Lazard FrSres & Co., Philippine businessman John Gokongwei's JG Summit Holdings Inc., and savvy American financier George Soros are all reportedly interested in Astra. Cacuk also dismissed suggestions that the Newbridge/Gilbert consortium bid was canceled because of corruption. "I can assure you that there's no corruption involved," he said. Asked if the agency would continue with its plans to dismiss current Astra management, Cacuk said: "It will depend on the results of the upcoming shareholders meeting." Astra is scheduled to hold a shareholders meeting on Tuesday. IBRA has threatened to dismiss Rini Soewandi on grounds that her management team obstructed the Astra sale by neglecting to provide necessary information to the Newbridge/Gilbert consortium during a due diligence process. Rini has rejected the obstruction charges on the basis of Astra's obligation to comply with Bapepam, the Capital Market Supervisory Agency. Astra is one of the high profile deals to be made by IBRA in the first quarter of this year. Meanwhile, Finance Minister Bambang Sudibyo installed three new senior officials at IBRA earlier in the morning. Arwin Rasyid, previously a deputy chairman, has been promoted to senior vice chairman, the second top position at the agency which was left vacant after Cacuk was promoted to chairman earlier this year. Mahmudin Yassin, a former senior official at the ministry of finance, has been appointed as deputy chairman overseeing the asset management investment which is responsible for asset disposal. Mahmudin replaces Farid Harianto, who has been demoted to an expert from IBRA chairman. Former vice president of publicly listed Bank Universal, Jerry Ng, has been appointed to head the agency's bank restructuring affairs. Jerry replaces Pande Lubis. Although Pande has been implicated in the high profile Bank Bali scandal, some have suggested that Farid should also be held responsible for the scandal. Risk management affairs is now handled by Chandra Purnama, previously the card center division head of state-owned Bank BNI. (The Jakarta Post 05-Feb-2000) PT BAKRIE SUMATRA PLANTATIONS: Loses on Lewis & Peat fold --------------------------------------------------------- PT Bakrie Sumatra Plantations said it is provisioning for losses totalling 110 bln rupiah after the company's overseas rubber trader, the Lewis and Peat Group, went bankrupt. "The total loss to PT Bakrie Sumatra Plantations as a result of this provisioning is 110 bln rupiah which will be reflected in the company's 1999 financial statement," Bakrie Sumatra said in a statement. It said Lewis and Peat's Singapore, London and Connecticut offices filed for bankruptcy late last year after a 180 mln usd trade finance facility arranged by Rabo Bank was cut off on Oct 31. The banking syndicate providing the loan also included PT Bank Negara Indonesia (New York) and PT Bank Rakyat Indonesia (London). "The total amount of the facility used according to the available limits as of end-October was 63 mln usd," the company said. Bakrie Sumatra said it is allowing for 60 bln rupiah in investment losses in Lewis and Peat and 50 bln rupiah for operational expenses through loans, upfront payments and other transactions with the trading company. The company said that while the closure of Lewis and Peat will mean lower consolidated sales, the company's profit ratio should improve. (AFX News Limited 03-Feb-2000) PT BANK CENTRAL ASIA: Ibra to chase assets of bank owners --------------------------------------------------------- The Indonesian Bank Restructuring Agency (Ibra) vowed to chase personal assets of the owners of banks that tapped US$19 billion (S$32.2 billion) of central bank aid, an official of the bank rescue agency said. Bank Indonesia lent about 70 per cent of the money to four banks to prevent them from collapsing as depositors clamoured to withdraw funds and non-performing loans swelled at the height of Indonesia's financial crisis in 1997 and 1998. While the government has seized an equivalent amount of the aid through asset swaps, it now wants to reevaluate those assets to make sure they cover the amount owed. It's focusing on the major shareholders of the Salim group's PT Bank Central Asia, the Gajah Tunggal group's PT Bank Dagang Nasional Indonesia, Usman Admadjaja's PT Bank Danamon and Bob Hasan's PT Bank Umum Nasional. In August 1998, BCA and Danamon were nationalised and BDNI and Bank Umum Nasional were closed. "It's clear that the banks' owners must be responsible and we will chase their assets to repay the liquidity support," Ade Sumantri Slamet told, the bank agency's deputy chairman told reporters at Parliament. The agency's drive comes as the State Audit Agency plans to investigate the aid loans to the banks after an initial audit showed that as much as 58 per cent of the money may have been lent improperly. Satrio Budihardjo Joedono, chairman of the state audit body, said the new probe will seek to trace whether the cash was used as intended by the government. Since the original settlement in September 1998, the Salim group has pledged more assets after it was discovered the group's debt was bigger than initially thought. The group has had to give up shares in about 100 companies. Gajah Tunggal's Nursalim also has to stump up more cash and assets after some of his assets -- namely PT Dipasena, a shrimp farming company -- turned out to be worth less than thought, an Ibra official said. The bank agency is trying to hire experts in asset tracing and forensic accounting to help it trace the personal assets to help recoup the US$85 billion it will cost the government to fix the nation's banks. (Singapore Business Times 04-Feb-2000) ========= J A P A N ========= NISSAN DIESEL MOTOR: To issue securities, get fresh credit ---------------------------------------------------------- Nissan Motor Co Ltd said it, Renault SA and four creditor banks have reached a basic agreement on a rescue package for Nissan Diesel Motor Co Ltd. Under a tentative agreement, Industrial Bank of Japan Ltd, Fuji Bank Ltd, Asahi Bank Ltd and Yasuda Trust and Banking Co Ltd will jointly arrange securitisation of Nissan Diesel's Ageo plant, to help it generate cash flow to further proceed with restructurings. Financial details are subject to further negotiations, a Nissan spokeswoman said. The creditor banks have also agreed to establish a four- year commitment line in which Nissan Diesel will be permitted to borrow up to 200 bln yen in total. Nissan Diesel itself will issue some 5 bln yen in convertible securities to strengthen financial positions. Nissan Diesel said it will begin supplying its ZD brand engines, with engine displacement of 3,000 ccs to Renault and its truck division Renault Vehicules Industriels SA. ZD engines are now used in Nissan's recreational vehicles as such El Grande and Terrano. The company also said it will also supply its F23 Atlas trucks with carrying capacity of 2.2-3.5 tons and F41 trucks with capacity of 6.5-7.6 tonnes to Renault/Mack group for distribution outside Japan. A company spokeman, however, declined to discuss the likely scale of supplies, adding that "all details are subject to ongoing negotiations." In return, Renault will supply its Master small-sized commercial vans to Nissan Diesel for distribution through Nissan Diesel's sales channel in Japan to help boost sales volumes. Nissan said it will also extend "strong support" to help Nissan Diesel reinforce its management and finances, which includes secondment of some of Nissan's staff to Nissan Diesel. Nissan Diesel itself said it is expected to unveil a medium-term restructuring plan as early as April, aiming for a return to profitability in the year to March 2002. A Nissan Diesel spokesman said he expects the planned securitization of its Ageo plant to "generate significant amount of cash flows" for the company. However, he declined to disclose the book value or the original purchasing cost of the Ageo plant. "What we can say is the plant is very old and cheaply built. So you can make significant money out of it," he said. The Ageo plant began operations on May 1962. (AFP- Extel News Limited 04-Feb-2000) NISSAN MOTOR CO.: Pushes forward with restructure plans ------------------------------------------------------- Nissan Motor Co. (7201) is moving closer to achieving its target of cutting interest and labor costs with negotiations on the sale of its aerospace unit in their final stages. But with a gloomy profit outlook for the auto industry, the company faces a long and difficult road to a full turnaround. Chief Operating Officer Carlos Ghosn made three pledges when he came to Nissan from Renault: First, the company would post consolidated profits in the fiscal year ending March 2001. Second, he would cut interest-bearing liabilities in half by the end of fiscal 2002 to 700 billion yen on a consolidated basis. Third, the operating margin on consolidated sales would exceed 4.5% in fiscal 2002. If the sale of the aerospace division goes through, it will help Nissan achieve the first two of these targets. But the third goal is likely to remain elusive, given the moribund state of the new car market. On Feb. 2, while declining to reveal the actual amount, Nissan said consolidated operating profit for fiscal 1999 would come in below the 90 billion forecast at the interim settlement. Now that Nissan is close to achieving the major tasks it set itself by shedding unneeded assets and businesses, the focus of its restructuring efforts will center on revamping its mainstay auto business. (Nikkei 03-Feb-2000) NKK GROUP: To cut 4,000 jobs, debts in process ---------------------------------------------- Japan's second-largest steelmaker said Thursday that it would eliminate 12 percent of its worldwide work force over the next three years as it struggles to cut costs. It's part of a larger plan to reduce consolidated interest- bearing debt by 400 billion yen to 1.2 trillion yen over the three years ending fiscal 2002. The integrated steelmaker also wants to raise group crude-steel output from about 19 million tons to some 20 million tons over the same period. "Our company's balance-sheet strength is lagging (behind other steelmakers), and our market valuation is low," NKK President Yoichi Shimogaichi said, stressing the importance of both business growth and financial targets. "If we don't resolve these issues, our future will not be prosperous," he added. NKK Corp. said it would eliminate 4,000 jobs by the financial year that ends March 31, 2003, reducing the total number of its employees to 29,000. The company said the restructuring would help it return to profitability and fulfill its aim of repaying $3.7 billion of its $14.8 billion of debt during the same period. "It is difficult to continue in this day and age without raising the market's view of your company," said Yoichi Shimogaichi, president of NKK, in explaining the need for the new plan. NKK said it expected to report a group pretax profit of $148.1 million in the current financial year, and profits of $833.3 million by the year ending in March 2003. NKK's shares fell 2.8 percent Thursday, to 70 yen (64.6 cents). Outside of Japan, NKK has a factory in Thailand and a subsidiary in Indiana. It has not yet decided where to make the job cuts, a spokesman said. Under the blueprint, NKK will pay down debt by tapping into free cash flow. The company aims to boost consolidated pretax profit to 90 billion yen in fiscal 2002, from the 16 billion yen projected for the current fiscal year. The bigger profits, combined with asset sales, are expected to generate a free cash flow of 400 billion yen over the three-year period. The entire stream of available cash will be channeled to pay down debt. Parent-only debt is expected to shrink from 990 billion yen to 700 billion yen. At the same time, NKK plans to fully exploit production resources at both domestic and foreign group firms to generate growth in output. As part of that effort, it also wants to strengthen its ties with Argentina's Techint Group, with which it formed an alliance last year. Techint Group is the world's leading producer of seamless pipe. (The International Herald Tribune, Nikkei 04-Feb-2000) TAIYO VINYL CORP.: Speeding up restructuring -------------------------------------------- Polyvinyl chloride resin producers, including Japan's largest maker Taiyo Vinyl Corp., are accelerating reorganization to boost performance in the relatively unprofitable field. Taiyo Vinyl, with cumulative losses exceeding 14 billion yen, will be rebuilt under the leadership of Tosoh Corp. (4042), Tosoh and the two other chemicals makers with which it jointly owns the firm formally announced Thursday. Taiyo Vinyl will be liquidated at the end of March and reestablished April 1. The new firm, which will do business under the same name, will be owned 68% by Tosoh and 16% each by Mitsui Chemicals Inc. (4183) and Denki Kagaku Kogyo KK (4061). Currently, Tosoh and Mitsui each hold 37% stakes in the firm and Denki Kagaku owns 26%. Mitsubishi Chemical Corp. (4010) and Toagosei Co. (4045) announced the same day details of a plan to integrate their PVC resin and materials operations in a new firm to be set up in April. Chisso Corp. has also said it will cut back on PVC operations. (Nikkei 03-Feb-2000) ========= K O R E A ========= DAEWOO MOTOR CO.: Requests for proposals go out this week --------------------------------------------------------- The office in charge of Daewoo Motor's sell off is planning to send out a request for takeover proposals this week, after the Financial Supervisory Commission (FSC) and the creditor banks of Daewoo Motor endorse a sell-off schedule. According to sources in the local auto industry and the creditors group Sunday, Daewoo group is expected to set up a corporate restructuring committee to oversee the sell-off of various group subsidiaries. If time permits, the committee is expected to forward a request for takeover proposal to foreign firms interested in taking over Daewoo Motor. Industry sources say the restructuring committee is certain to invite GM and Ford to submit takeover proposals. The same sources added, however, that the committee has not yet decided whether to invite other firms interested in taking over Daewoo, including other foreign firms like DaimlerChrysler and Volkswagen. It also remains to be seen whether interested local organizations like Hyundai Motor and the Korea Federation of Small Business (KFSB) are invited to submit bids. Hyundai Motor has expressed interest in taking over Daewoo Motor's Polish plant and the KFSB recently announced its intention to try taking over Daewoo Motor as part of a consortium of parts suppliers and other investors. The Daewoo creditors plan to conclude the selection of the priority candidate in March or April with an intention to wrap up the sale by June. (Digital ChosunIlbo, Korea Times 06-Feb-2000) KOOKMIN LIFE INS.: Initial bidding to begin this week ----------------------------------------------------- An initial round of bidding for the takeover of Kookmin Life is due to begin this week, with the actual appointment of a preferred company for sell-off negotiations expected by February 25. The Financial Supervisory Service (FSS) said it will receive letters of intent from potential buyers by Feb. 9 and bid proposals by Feb. 22. A preferred buyer will be selected from among the candidates by Feb. 26. The FSS wants conclusion of a final agreement by the end of March. The government has set the minimum price for Kookmin Life at 100 billion won. In case of the top five chaebol groups, they are required to abide by the 200 debt-to-equity target and carry out their capital structure improvement accords with their main creditor banks. After last year's talks with New York Life failed, the government decided to open up the bidding process. The Financial Supervisory Commission (FSC) said Sunday that it would be accepting letters of intent from prospective bidders up to Wednesday, with the deadline for purchase proposals set for February 22. Industry sources say that currently, two local life insurance firms, SK and Yongpoong, have been moving ahead with plans to take part in the bidding. (Digital ChosunIlbo 06-Feb-2000, Korea Herald 07-Feb-2000) =============== M A L A Y S I A =============== AVENUE ASSETS BHD: To reducing debt burden via sale --------------------------------------------------- Pantai Holdings Bhd, which holds 28% of Avenue Assets Bhd (formerly known as PhileoLand Bhd) said Avenue Assets' sale of property assets this year would lead to a big reduction in the latter's heavy debt position. Pantai Holdings, executive chairman Mokhzani Mahathir said: "We hope Avenue Assets' borrowings could be reduced to RM150mil from RM500mil currently within the next six months through bigger property divestments." He told reporters after Pantai's EGM in Kuala Lumpur yesterday that "talks are on-going with some companies to divest these properties, apart the sale of some buildings recently." The EGM was called to consider the acquisition of a 28.15% equity interest in Avenue Assets. Last year, Pantai announced the acquisition of 16.78% of Tongkah Holdings Bhd for RM108.7mil and the ratification of a purchase of 28.15% in Avenue Assets for RM222.1mil. The two acquisitions were made by Maxgold Investments Group Ltd and Glossmere Investments Ltd respectively. These two companies are wholly owned by a subsidiary of Pantai. "Our next move will be to fully realise investments in Avenue Assets and Tongkah made prior to the economic crisis," said Mokhzani who is also Tongkah executive chairman and chief executive officer. On Pantai's performance, Mokhzani said the company was expecting better results this year compared to last year. "We expect hospital and support services to contribute significantly to our turnover," he added. He said Pantai planned to expand to other parts of the country. "We have been studying Johor for quite sometime," Mokhzani said. He added that: "Pantai is not just looking at specialist hospitals but other healthcare-related business outside the Klang Valley." (The Star 04-Feb-2000) LAND & GENERAL: Aims to finalise debt revamp scheme soon -------------------------------------------------------- Land & General Bhd (L&G) expects its debt restructuring proposals to be finalised in the next three months. The company said in a statement to the KLSE that it was working with trade creditors, bank lenders and advisers to finalise the proposals. It said that as a result of the economic downturn, it had been faced with a tight cash-flow position which had impaired its ability to service its debts. As of Sept 30, 1999, L&G said, it owed about RM787mil to bank lenders. It is now working with bank lenders to restructure and reschedule RM529mil of its existing loans/facilities and the bank lenders' proposal does not involve any "haircut" or write-off of amounts that L&G owes them. The company said it was also exploring various proposals to settle the amounts due to its trade creditors, which amounted to about RM100mil, as oft Sept 30, 1999. The trade creditors' proposal involved mainly the extension of repayment period as well as issuance of equity as part payment to some of the creditors of the L&G group's property development subsidiaries, for about RM58mil. L&G said it was also proposing to restructure its 4.5% Euro convertible bonds (ECBs) via a combination of equity and equity-linked instruments and cash payment. Based on the current outstanding ECBs of US$64mil, L&G will have to pay out about US$83.7mil (RM318mil), if all the ECBs are to be redeemed in 2001. L&G is also proposing to finance the redemption of the redeemable preference shares (RPS) in Bandar Sungai Buaya Sdn Bhd through a combination of cash payment, issuance of equity and set-off with properties of the L&G group. The company also intends to embark on an asset disposal programme to raise cash for the group. It plans to sell off its non-core assets and focus on property development. In a separate statement, L&G also proposed to issue up to 58,152,400 new shares or representing 11.61% of its issued and paid-up capital at Dec 31, 1999. The new shares will be issued to certain contractors and consultants of L&G subsidiaries Bandar Sungai Buaya, Lembah Beringin Sdn Bhd and Sri Damansara Sdn Bhd. The new shares are payment for work completed and certified and as payment for future works to be completed and/or certified. The maximum number of 58,152,400 new shares was arrived at based on the total amount of debt of RM58,152,400 that is proposed to be settled with the contractors and consultants, and the minimum issue price of RM1 per new L&G share. (The Star 04-Feb-2000) ===================== P H I L I P P I N E S ===================== MONDRAGON INT'L PHILIPPINES: Banks start asset-acquisition ---------------------------------------------------------- Major creditor banks of Mondragon International Philippines, Inc. (MIPI) have started to acquire major assets of the Mimosa Leisure Estate in Clarkfield, Pampanga as payment for the company's six-billion-peso (US$147.6 million at PhP40.65:US$1) loan obligations. However, MIPI president Jose Antonio Gonzalez is not about to give up, adding that funding from a US-based trust fund is forthcoming by the end of the month. In an interview, outgoing Clark Development Corp. (CDC) president Rufo Colayco yesterday told BusinessWorld MIPI creditors have notified the state agency of their plans to "take over" the Holiday Inn hotel and the Regency Casino. Likewise, CDC has received an offer from the Bank of Commerce for the purchase of the 36-hole golf course within the leisure estate. The bank is reportedly representing an investment client which it did not identify. "It is now up to the new administration to decide. They have to put the estate in the hands of a private sector group who has the capability to finance the further development of the estate," Mr. Colayco said. He added that given the job it generates, it is to the best interest of Clark that the Regency Casino be reopened at the soonest possible time. Meanwhile, Mr. Gonzalez said its creditors could not possibly take over Mimosa, saying the case is still being litigated and that "the decision (on CDC's takeover) is not yet final." "There are 20 creditor banks that have banded together to sue any party that will attempt to lease any other portion of the Mimosa Estate in order to protect their interests. Therefore, in addition to the estate being not divisible since the ongoing litigation precludes such a division), this effort will prevent any lease from being consummated," Mr. Gonzalez said, referring to banks with a total exposure of PhP150 million ($3.7 million) and whose loans to MIPI are either unsecured or semi-secured. Mr. Gonzalez also reiterated that a $200-million fund will be remitted to the company between February 20 to the first week of March. He said the amount will allow the company to pay the creditor banks and government institutions such as the Bureau of Internal Revenue (BIR), the Philippine Amusement and Gaming Corp. (Pagcor) and CDC. MIPI earlier said the money should have been in last January. Last December, CDC took over the 215-hectare leisure estate for the second time after MIPI failed to pay its PhP325-million ($8 million) rental payments. The renegotiated contract -- signed on July 28 -- requires MIPI to pay arrears in six tranches beginning August. MIPI was also required to provide CDC a letter of credit from bank creditors to guarantee payments will be made. However, none of these was delivered and as such gave the state agency the right to take over the place. (Business World 04-Feb- 2000) NATIONAL STEEL CORP.: Gov't asks Spanish group to invest -------------------------------------------------------- Government is asking a group of Spanish investors to consider National Steel Corp. (NSC) as a possible investment venture in the Philippines, along with shoes manufacturing, agro-processing and power generation. Meeting with the Spanish business and trade delegation that accompanied the visiting Queen of Spain, Trade Secretary Manuel Roxas II said the group had expressed interest in exploring possible business ventures in the Philippines. Roxas said the Philippines could take advantage of its strategic position as a gateway to Asia and an ideal place for investments for companies wishing to establish their presence in the region. According to Roxas, the Department of Trade and Industry (DTI) has suggested NSC as a possible venture for Centunion Corp., a member of the delegation. NSC is being packaged to attract foreign investors as part of its rehabilitation plan. Roxas said other sectors in which Spanish businessmen may invest are shoes manufacturing and agro-processing. He expressed optimism that the delegation would seriously consider these sectors for future investments. Also in the delegation and representatives from Banco Bilbao Viscaya (BBV) who are looking at a possible shipbuilding venture. "We can not reveal the location but the company has in fact begun studying specific factors like technical skills and manpower, power supply and other production-related concerns," Roxas said. Roxas said the Swiss giant Asea Brown Boveri is also in the delegation and is looking at further investments in power generation. ABB has already undertaken a power-generation project involving a diesel-fueled power barge that supplies supplementary power to Mindanao. "Our distinct advantage is our ample supply of skilled and English-speaking manpower," Roxas said. "Investors appreciate this, they come here despite our obvious limitations in infrastructure." Latest figures from the Philippine Economic Zone Authority (PEZA) indicate that investments by export-oriented companies shot up by 162 percent this month, from P793 million in January 1999 to P2.085 billion this January. The biggest investment worth P670 million came from San Technology, a 100-percent Japanese-owned company at the Cavite Economic Zone. The company registered a new project involving the manufacture of magnetic voice coil motor for computer hard disks and pager of cellular phones. The second biggest investment came from Cypress Semiconductor Philippines, a 99.98-percent American-owned company which launched a new project for the manufacture of fine pitch/flexible ball grid array. PEZA also reported the registration of E. Telecare International Inc., a P437.2-million enterprise located at Eastwood City Technology park. (The Philippine Star 05-Feb-2000) UNIWIDE GROUP: Investors' entry hinges on debt rehab ---------------------------------------------------- British retail group Kingfisher Plc. and French chain Casino are reportedly interested to invest in cash-strapped Uniwide Group of Companies on one condition -- the group has to be debt-free. BusinessWorld learned yesterday that Uniwide's management is fast-tracking the implementation of the group's rehabilitation plan since the two foreign investors will not submit their respective proposals unless the local retail chain has significantly reduced its obligations, estimated to reach 11.1 billion Philippine pesos (US$273 million at PhP40.65:US$1). The group's debts have piled up to PhP11.1 billion. Of this amount, PhP6.95 billion ($170.9 million) is owed to 13 creditor banks. Loans from the banks have maturities ranging from 1998 up to 2003. Sources identified the two interested investors as Kingfisher and Casino, two of Europe's largest retail firms, instead of The Carrefour Group which was earlier rumored to be signing a deal with Uniwide owner Jimmy Gow. In an interview with BusinessWorld, a company source neither confirmed nor denied talks with the two foreign groups, saying the management is bound by a confidentiality agreement executed with the prospective investors. "We are bound by a confidentiality agreement and until we have received a firm proposal from them, we cannot disclose anything. Nothing official is out yet from the receivership. But they're (investors) just awaiting the implementation of the rehab plan which we are about to complete," the source said. The source said earlier that the foreign firms have completed due diligence studies on the Uniwide Group and have moved on to a more serious level of discussions with the management. The source, however, said it will be up to the Securities and Exchange Commission to immediately implement the rehabilitation plan which requires the group to settle its obligations with creditors through debt-for- asset arrangement. To date, Uniwide has already settled debts owed to East Asia Capital Corp. (PhP60.4 million) and United Coconut Planters Bank (PhP1.044 billion). The source added that in a week's time the prospective partners will be submitting their respective proposals which could spell the fate of the Uniwide Group that has long been suffering from ballooning debts. British firm Kingfisher is one of Europe's largest non-food retailers with focus on markets centered on the home and family. The company operates principally through its European businesses namely, DIY (Do It Yourself) and Electricals and its UK High Street general merchandise sector. The company owns Woolworths, Superdrug and Chartwell Land - - which is one of UK's largest specialist retail property companies -- as well as home improvement chains in Britain and France. It has expanded in Asia through Kingfisher Asia in Hong Kong and is set to open a satellite office in Shanghai. Through its 2,700 stores in 13 countries, the company posted sales of $12.09 billion in 1988. French chain Casino, on the other hand, is mainly a food retailer but is also involved in selling hardware, clothing and other goods at its hypermarkets. The group has recently moved into Taiwan and Thailand after setting up shop in Poland, Argentina and Uruguay. The foreign group was also responsible in helping Thailand's Big C -- the biggest hypermarket operator in the said country -- to rehabilitate when it experienced financial troubles. The Uniwide Group has been negotiating individually with creditor banks for a debt-for-asset swap deal to wipe off loans. In the latter part of December last year, Uniwide Sales Realty and Resources Corp. (USRRC) paid off its PhP1.044-billion ($25.7 million) obligation to United Coconut Planters Bank via real estate properties. USRRC is 98% owned by listed holding firm Uniwide Holdings, Inc. (UHI). UHI likewise entered into a memorandum of agreement with East Asia Capital Corp. early this week for the settlement of its PhP60.4-million ($1.5 million) debt through a similar arrangement. Earlier, two prospective local investors were rejected by the Uniwide. El Shaddai leader Mike Velarde and his group had offered PhP900 million ($22 million) in exchange for a majority stake in the retail warehouse clubs of UHI. The sources said the Gow family and the receivership committee junked Mr. Velarde's proposal because it was "extremely low." The Gows also "rejected" Rizal Commercial Banking Corp.'s (RCBC) bid for the acquisition of Uniwide Sales Warehouse Club, Inc. (USWCI). The Gow family has 100% ownership in USWCI. RCBC and holding firm House of Investments offered about PhP1.8 billion ($44.3 million) to PhP2 billion ($49.2 million) for USWCI. The proposal consisted of between PhP1 billion ($24.6 million) and PhP1.2 billion ($29.5 million) in cash, with the remaining in the form of a debt write- off. (Business World 04-Feb-2000) UNIWIDE GROUP: Creditor bucks sale of subsidiary Paragon -------------------------------------------------------- The Philippine Bank of Communications (PBCom), one of the creditors of cash-challenged Uniwide Group of Companies, is opposing the sale of First Paragon Corp. (FPC) for P145 million to I Mart International Corp. (I Mart). FPC, one of the subsidiaries of Uniwide, is set to close the sale on Feb. 7 coinciding with the expiration of the third 60-day debt relief given to the retail and property group. In its comments submitted to the SEC, PBCom said the sale is not valid because the bank's approval was never sought and its conditions, ignored. At the same time, the sale, if it pushes through, will violate Section 4 of the Bulk Sales Law. PBCom said it informed the SEC on Oct. 15, 1999 that it was giving its consent to the sale, but wanted certain conditions to be integrated into the terms of the sale. However, it never got a response from the SEC nor from Uniwide's interim receivership committee. Instead, Uniwide chairman Jimmy Gow went ahead with the sale last Dec. 9, 1999 which the SEC approved last Dec. 20. PBCom said that upon looking at the MOA between FPC and I Mart, it was clear that not one of its conditions were considered. These include: withdrawal of the pending petition for declaration of a state of suspension of payments in respect of FPC, simultaneous with the execution of any document evidencing the proposed sale; all proceeds from the sale be held in escrow subject only to the rights of PBCom as direct creditor to receive payment on FPC obligations, and no disposition of such proceeds be made from the escrow account except upon mutual consent of all FPC creditors. Moreover, PBCom said its rights and interest as FPC's direct creditors should be preferred over any accommodation or third-party guarantee which may have been granted by FPC or any other claim by FPC affiliates. PBCom added the sale also violated the Bulk Sales Law which requires advance written disclosure to creditors by delivering a sworn statement of listing of assets and credits, and the pro- rate application of the proceeds to bonafide claims of the seller, mortgagor, transferor or assignor. This provision also means the release of the escrow fund in favor of the PBCom and USWCI as the only creditors of FPC. The sale of FPC is part of a three-pronged recovery plan for Uniwide which calls for an immediate equity infusion in the retail business, dacion en pago of non-operating assets and restructuring of remaining liabilities. FPC is one of Uniwide subsidiaries. It owns and operates 44 retail stores called Uniwide Family Store with various leased areas in Luzon. (The Philippine Star 04-Feb-2000) VICTORIAS MILLING CO.: Two sugar millers in bidding --------------------------------------------------- Sugar mills Central Azucarera de Don Pedro (CADP) and Central Azucarera de la Carlota (CAC) may still invest in cash-strapped Victorias Milling Co.(VMC). Financial firm RCBC Capital Corp., one of two companies which prequalified for an auction of new VMC shares, has managed to convince the two mills to participate in the bidding process as partners. A CADP official told BusinessWorld the two mills will post a bid as a group once they finally decide to participate in the auction scheduled for March 20. It was also revealed that the Yuchengcos are not themselves interested in VMC. RCBC Capital Corp. has signified its intent to participate in the auction in behalf of CADP. The sources said if RCBC Capital succeeds in getting the controlling 53.35% of VMC, CADP will become the most dominant sugar miller in the country. The Roxas-owned sugar miller also now owns Central Azucarera de la Carlota in Negros Occidental. VMC's creditor banks will bid out 567 million new shares at a floor price of 567 million Philippine pesos (US$13.9 million at PhP40.65:US$1). CADP senior vice-president for finance Asuncion S. Aguilar yesterday said RCBC Capital has been able to win over CADP and CAC as its partners in a share auction which will give the winner a 53.35% stake in VMC. "We have a close relationship with banks. Actually, there were several parties which approached us in the past but among them it was RCBC which came through," Ms. Aguilar said in a telephone interview. Among the financial firms which have approached the Roxas- owned mills, she said, RCBC Capital has been the most persistent in convincing CADP and CAC to participate in the auction as RCBC Capital's investment partners. RCBC Capital, incidentally, also has a 10% stake in CADP. "And since VMC and CADP are both in sugar, we agreed to take a serious look (at VMC to check) if there's something for us here," Ms. Aguilar told BusinessWorld. Ms. Aguilar said their mills and RCBC Capital will conduct a due diligence audit on VMC and eventually post a bid "as a group," if they finally decide to do so. "We will do it as a group whether it will be RCBC's name or CADP's name which will appear in the auction," she said. She stressed, however, that the group's decision to eventually pursue an investment in VMC will all depend on the results of their due diligence audit of VMC. "It depends on the due diligence really because before we submit our final bid, we'd want to know what's happening to the company. We'd like to look at it first to examine if an investment in VMC will be good for us," Ms. Aguilar said. The due diligence audit, which will cover VMC's finances and operations, will be done by the three companies to determine the feasibility of buying into VMC which is considered the country's largest sugar mill. Out of five firms which formally expressed interest in VMC, only two companies -- RCBC Capital and agribusiness multinational Cargill Philippines, Inc. -- prequalified for the auction itself. In a previous interview, a CADP official said VMC's debt and the prevalence of sugar smuggling has made capital infusion into the company economically unviable. VMC's original debt stood at PhP6.6 billion ($162.4 million) but PhP1.5 billion ($36.9 million) out of its total liabilities has already been converted into equity for the firm's creditor banks. Ms. Aguilar, however, said CADP and CAC will give VMC a second look, saying a merger with VMC will help the industry cope with increased trade liberalization. "We're seeing a consolidation in the industry. The moment is right for the industry to change face in the midst of globalization... We feel that we can play a major role by correcting whatever defects the industry has especially in terms of efficiency but we cannot do it alone," she said. A Negros Occidental-based sugar-cane planter, who requested not to be named, said CADP and CAC's purchase of a majority stake in VMC will allow the Roxas family to become the country's biggest sugar miller. The planter source said the merger will allow the Roxas family to produce close to 30% of the country's overall raw sugar output. VMC alone, which is considered the country's largest sugar mill, accounts for 12% of the country's raw sugar production. VMC is capable of processing 12,000 to 14,000 metric tons of sugarcane daily. CADP and CAC, on the other hand, are able to process daily 10,000 MT and 11,000 MT of cane, respectively. (Business World 04-Feb-2000) =============== T H A I L A N D =============== ASIA FINANCE SYNDICATE: Lawsuits could to block repayment --------------------------------------------------------- Loopholes in the FRA Act threaten to undermine the entire process of repaying creditors of the 56 defunct finance companies, following a civil suit filed by a creditor against Asia Finance Syndicate. The Financial Sector Restructuring Authority is due to begin repaying creditors after liquidating assets in the next few months. Most creditors of the finance companies have signed contracts with the FRA to abide by its repayment procedures. But one creditor of Asia Finance Syndicate, one of the 56 firms, also filed a suit late last year with the Civil Court even after agreeing to follow the procedures. The FRA was concerned that this would place other creditors who had agreed to comply with the authority's claims settlement process at a disadvantage. The FRA filed a bankruptcy suit two weeks ago against Asia Finance Syndicate to allow the court to settle claims and suspend other legal actions against the firm. On Wednesday, the Central Bankruptcy Court declared Asia Finance Syndicate bankrupt, putting the company into receivership. Montri Chenvidyakarn, FRA secretary-general, said the action was necessary to prevent similar suits being filed against other suspended finance companies. In the case of Asia Finance Syndicate, all creditors would now have to submit their claims with the court within two months, even if they had already registered with the FRA. Dr Montri said the FRA was ready to assist creditors in filing their claims with receivers of the Legal Execution Department. "The civil case filed against Asia Finance Syndicate involved debt of around 10 million baht," he said. "Another 17 companies were preparing to also file suit, for debt about 140 million. If the FRA didn't file for bankruptcy, the result would have been that the creditors who did file suits would have gained an advantage, receiving full payment for their claims, in addition to a share from the FRA," he said. Dr Montri blasted the actions as taking unfair advantage of other creditors who had complied with the rules and contract terms of the FRA process. Asia Finance Securities has assets of about 2.4 billion, with outstanding liabilities of about 7.4 billion baht owed to 85 creditors, largest being the FRA holding around 95% of total claims. Dr Montri said the legal process would cause final repayment to creditors to be delayed by up to two years, as documents would have to be re-examined by receivers. In contrast, creditors under the FRA process are expected to be repaid by June. "Creditors of the finance companies do have the right to sue. The purpose and goal of the FRA was to ensure repayment as quickly as possible, to help foster recovery," Dr Montri said. "But it's beyond our power to prevent this, since the laws don't prohibit creditors from taking civil action even after they have accepted the conditions of the FRA process." Another four or five creditors are reportedly preparing similar suits against other finance firms under the Financial Sector Restructuring Authority's supervision. The FRA says it will file bankruptcy against any other finance companies which have creditors filing civil suits, ultimately resulting in years of delay before final payment can be made. In any case, payment to creditors of the proceeds raised to date will proceed over the next six months, after which the Financial Sector Restructuring Authority will file suit to close the finance companies permanently. The FRA has raised 186 billion baht from asset auctions held over the past two years, representing some 28% of the total outstanding principal balance of assets. Dr Montri said the Financial Sector Restructuring Authority would begin repaying creditors of two firms, Royal International and Muang Thong Trust, in March. (Bangkok Post 04-Feb-2000) ATEC COMPUTER: Loses court battle over illegal software ------------------------------------------------------- The Criminal Court has found ATEC Computer, a well-known computer-system manufacturer, guilty of loading its machines with illegal software. The case is considered as the first instance where the world's largest software developer, Microsoft, has gone after a local computer manufacturer demanding severe penalties. The Criminal Court fined ATEC Computer Bt400,000 for copyright violation. A company director received an additional one-year suspended jail sentence and a fine of Bt200,000. The salesman responsible for selling the computer installed with the unlicensed Microsoft software was punished with a nine-month suspended jail sentence and a fine of Bt150,000. The total fines amounted to Bt750,000. Microsoft law and corporate affairs legal officer Kenny Cheung said that the stiff penalties were needed to deter software infringement in Thailand. "This is a very large fine imposed by the court involving computer software. It will leave no doubt in the minds of illegal software dealers that they will face stiff penalties for copyright violations in Thailand,'' Cheung said. ATEC Computer was caught loading unauthorised copies of Microsoft software on computers and selling them to the consumers without the appropriate documentation, license agreements, original disks or manuals. Nithiphat Limwanichart, general manager of ATEC Computer said that the announcement from Microsoft at this time has had a negative effect on the company's reputation because it is in the process of appealing to the US Supreme Court. So, it is not acceptable to speak about the case in public. "I think that any announcement should be withheld until after the Supreme Court makes the final judgement," Nithiphat said. According to Cheung, not only were consumers cheated out of the genuine software, but also honest dealers, trying to develop a successful business legally, ended up shouldering higher costs because of dealers selling illegal software. "Unless decisive action is taken against illegal software dealers, they will continue to sell unauthorised software and make it very difficult for local developers and dealers of genuine software to compete in the Thai market. Strict protection and respect for copyright is a critical factor in the healthy development of the Thai software industry,'' he said. Cheung believes that copyright owners and local distributors have seen some positive developments in the information technology sector in Thailand recently, which will have positive effects for the economy in the long- term. "While there is an unacceptably high piracy rate of over 80 per cent, we have seen increased efforts by Thai enforcement agencies to crack down on piracy," he said. "As illustrated in this case, there has been greater efficiency in processing cases coming before the courts in Thailand and an increase in the level of fines imposed against copyright offenders." This is the second significant court ruling against ATEC Computer and follows two years of comprehensive investigation and legal action. The case resulted from the Dealer Test Purchase Program (DTPP) conducted in February 1997, after which Microsoft filed two private criminal actions against ATEC Computer. The second case has already been concluded in the Central Intellectual Property and International Trade Court where ATEC Computer and a director were fined in excess of Bt1 million in May 1999. (The Nation 05-Feb-2000) BAN CHANG PLC: Facing bankruptcy after creditor sues ---------------------------------------------------- After failing to repay a creditor owed Bt36 million, Ban Chang Plc and its major shareholder Pairote Piempongsant face a bankruptcy lawsuit. In its affidavit, Siam Sanwa Industrial Credit Plc (SICCO) identified Ban Chang, Pairote and Prayoon Chindapradit as responsible for the debt. Pairote is the founder, president and a major shareholder of the debt-ridden company. Prayoon is an authorised director. Ban Chang's debts snowballed due to the slump in the property market and a business strategy that concentrated mostly on the eastern seaboard. It owes creditors a total of Bt4 billion. The company is now in the process of rehabilitating itself. In 1996, Ban Chang borrowed Bt25 million from SICCO. After Ban Chang didn't repay the debt, SICCO took the company to civil court. On Dec 30, 1997, the court ordered the three debtors to repay the debt and set the interest rate at13.75 per cent per annum. "The case is brought to the bankruptcy court because the defendants failed to repay debts in accordance with the civil court's order made on Dec 30, 1997," SICCO said in its affidavit. Ban Chang used land and buildings in Rayong as collateral for the loan. Under the loan contract, SICCO can force a sale of the land if repayment is not made. If the proceeds from the sale are less than the debt, the three defendants have to pay the shortfall, according to the contract. As the three have not yet repaid the debts, SICCO is pressuring the company to sell the property, which is valued at Bt13 million. The property is still unsold, it said. SICCO submitted two requests to the company to sell the land, but had not received a response, the finance company said. As Ban Chang has not yet submitted financial statement for 1998 to the Commerce Ministry, the defendants are considered bankrupt, said SICCO, which asked the court to place the assets of the three defendants in receivership. The most recent financial statement of Ban Chang was for the first nine months of 1997. The company lost Bt1.43 billion, according to that statement. Since 1996, Ban Chang has put development projects on hold and sold many stakes in affiliates and other companies. To survive, the company initiated a programme to develop and sell projects quickly. The projects were offered cheaply but the proceeds could not cover the huge debts incurred from the company's massive expansion during the property market boom. Four years ago, Ban Chang was in a very different position. It was a large property developer focused mainly in Rayong province. It anticipated huge profits from the eastern seaboard development project. The Central Bankruptcy Court has scheduled the first hearing for Feb 11. (The Nation 04-Feb-2000) BANGKOK BANK: To stay in red this year -------------------------------------- Bangkok Bank chairman Chatri Sophonpanich said yesterday the bank will not return to profitability this year, but operating performance is encouraging and the bank should break even by the end of the year. His comments came a day after Thai Farmers Bank (TFB) president Banthoon Lamsam said he is confident his bank will return to profit this year. Chatri said BBL would increase its provisioning to cover all of its non-performing loans (NPLs) later this year in line with central bank requirements. "The bank cannot avoid losses this year because of non- performing loans, which are a major burden for the bank in terms of loan-loss provisions. But the number of non- performing loans are falling due to the significant progress being made in debt-restructuring and write-offs," he said. According to a recent filing to the Stock Exchange of Thailand, BBL's net losses last year totalled Bt60.1 billion against losses of Bt49.5 billion the year before. Fitch IBCA, the London-based rating agency, predicted that TFB will be the only Thai bank to show a net profit this year, while others continue to suffer the need to build reserves against problem loans. "In our view, it (TFB) has been the most proactive in dealing with the crisis," said Vincent Milton, Fitch associate director responsible for risk assessment of the Thai banking sector. "All the others will report net losses." Milton painted bright future prospects for the bank, noting that it has already met full provisioning requirements after raising almost Bt100 billion in fresh capital, but the other seven big banks need a total of US$3.5 billion (Bt129.5 billion) to deal with bad loans from the Asian financial crisis. As of the end of last year, problem loans in the Thai banking system stood at Bt1.98 trillion or 38.2 per cent of total credits. Milton is now in Thailand to meet bank executives ahead of a ratings review in March. "TFB stands out. It is fully provisioned in line with our projected loan losses so its capital adequacy should be OK. It is the only large bank in such a position and the only one we see reporting a net profit for this year," he added. Milton also praised TFB's decision to ask Goldman Sachs and GE Capital to help run an asset management company to manage its non-performing loans (NPLs), an innovation that he said would be watched closely by other banks. Fitch IBCA put TFB on "Rating Alert Positive" this week, giving notice that it was likely to raise its individual rating for TFB from its current level of D/E in the next few months. Milton said the two other biggest Thai commercial banks, BBL and Siam Commercial Bank (SCB), had also made progress towards re-capitalisation but both needed to set aside further huge sums to cover non-performing loans. Milton said BBL needed to set aside at least Bt26 to Bt30 billion more in provisions. "We would be surprised if its earnings can get anywhere close to that figure, so it will report a net loss for this year." For SCB, he said he had "some concerns" about the level of the bank's proactive debt restructuring. "There is some downside risk for SCB. We would expect another net loss for this year," he added. The other two large Thai banks, Thai Military Bank (TMB) and Bank of Ayudhya (BAY), had made less progress with re- capitalisation and managing their bad loan portfolios and both needed to set aside further provisions against bad loans. (The Nation 05-Feb-2000) BANGKOK METROPOLITAN BANK: Ex-execs criminally charged ------------------------------------------------------ Two former Bangkok Metropolitan Bank executives have been formally charged by police with breaching banking and stock exchange laws. Former bank president and Thailand Board of Trade chairman Vichien Tejaphaibul and former bank executive director Panya Tantiyawarong were yesterday charged with having violated the Bank of Thailand and Stock Exchange of Thailand laws during the period leading up to the bank's bad debt crisis, police said. Panya denied the charges and was released on Bt700,000 bond. Police have unsuccessfully sought Senate permission to proceed with legal action against Vichien, who is a senator, during the present session of Parliament. (The Nation 05-Feb-2000) SSP GROUP: Plans to focus solely on steel production ---------------------------------------------------- SSP group has decided to focus only on steel production and plans to discard its non-core businesses, according to the company Executive Chairman and Chief Executive Somsak Leeswadtrakul. SSP Group conceded that during the economic boom, the company made several unwise investments, venturing into businesses in which it had no expertise. The hard lessons of the past have led the company to focus on its core business--steel production, Somsak said. "Steel manufacturing was one of our forte with over 40 years of experience, and we will continue to keep it as well as the related production companies," said Somsak. He said SSP produced roughly 4.5 million tonnes of steel product annually; most of it was for local consumption. However, with the new direction, SSP aims to increase exports by $300 million in three years. In addition, he said the company planned to reshape its steel-related businesses such as construction and property development. As part of the new strategy, the company had sold part of its health care interest in Vejsawad Hospital, Srisiam Hospital, Chularat Hospital Center and Public Health and Environment. Meanwhile, Felex Hotel, one of SSP's subsidiaries, was also under restructuring process with the possibility of joint venture with new partners, he said. He denied that the conglomerate's decision to change business course had anything to do with last year's bankruptcy lawsuit, filed by HEI Thailand Group, SSP's partner in Siam Power Generation Co. The lawsuit, he continued, was not involved with financial matters but was only a dispute regarding ownershi stakes in the power company. The conflict began when SSP signed a deal to buy 12 percent stake in financially ailing Siam Power from HEI Group, which owns 36 percent stake in the power company. (Business Day 04-Feb-2000) SSP GROUP: Somsak seeks deal with HEI ------------------------------------- Somsak Leeswasditrakul, chairman and chief executive of SSP Group, is stepping up efforts to seek a compromise over a bankruptcy suit filed by HEI Thailand (Rayong) Co, his business partner in a power plant joint venture. He said that failure in negotiations for the acquisition of a 12% stake in Siam Power Generation Co, from HEI Thailand, was a major reason behind the suit. HEI holds a 36% share in Siam Power Generation, a subsidiary of the SSP Group, under a joint-venture agreement made on June 12, 1998. The failure in the talks was attributed to different views over share prices. "HEI wants to sell shares at a price based on the current baht value while our group wants to use the price in the original agreement. Neither one of us wants to bear foreign exchange losses which have occurred," Mr Somsak said. Although the suit was already filed, the negotiations were under way, said Mr Somsak, adding that he believed an agreement would be finally reached. In the suit filed late last year, HEI told the Bankruptcy Court that Mr Somsak did not comply with the joint venture agreement to establish a 450-megawatt power plant in Rayong. The non-compliance caused 342 million baht in damages to the company, HEI claimed. HEI wanted to sell its 12% stake in Siam Power Generation after the SSP Group decided to reduce production capacity from 450 megawatts to 300 megawatts. But Mr Somsak said a decrease in public demand for electricity consumption, due to the economic crisis, made it necessary for the production capacity reduction by Siam Power Generation. The suit is the second bankruptcy case involving Mr Somsak. In September last year, Siam Syntech Construction Plc, an SSP subsidiary, was sued by Nakornthon Leasing for bankruptcy over its failure to settle a debt of 46 million baht. Recently, the Central Bankruptcy Court dismissed the suit, noting Siam Syntech was not insolvent. Tony Chan, executive director of Siam Syntech Construction, said the company was in the process of debt restructuring under the supervision of the central bank's corporate debt restructuring advisory committee. Siam Syntech was also restructuring its management team to boost work efficiency. Mr Chan said creditors currently resorted to the bankruptcy law despite the fact that debtors were able to repay the money. He added that in his opinion, creditors should, in the first instance, file a suit against debtors in the Civil Court. The Central Bankruptcy Court should be a last resort if debtors are proven unable to repay debt. Businesses under the SSP Group umbrella include those involved in steel production, property development, hotels, hospitals, construction, electricity generation, and commerce. Mr Somsak conceded that his group had diversified into various businesses since 1997 but now had trouble in some businesses in which it had insufficient expertise. Because of this, the group had decided to concentrate on steel production, he said. "Steel production is a core business we have engaged in for more than 40 years. So from now on, we will give an emphasis to the steel business and other related areas." Steel production capacity, under the SSP Group, totals around 4.5 million tons annually, most of which is exported. For the construction and property development business, Siam Syntech Construction would act as a core unit to speed up restructuring operations. For the hotel business, the group would try to streamline the operations of eight hotels it owns through Felix Hotel and Resorts and would later seek new partners. The group plans to sell shares of all hospitals it owns including Vejsawad, Srisiam, Chularat and the Public Health and Environment Hospital. (Bangkok Post 04-Feb-2000) VANACHI GROUP: Reports debt-rehab progress to SET ------------------------------------------------- According to Vanachai Group Public Company Limited and subsidiaries, through Mr.Wanthana Jareonnawarat, Director, the company consisted of Particle Planner Co.,Ltd.,Vanachai Chemical Industries Co.,Ltd.and VanachaiPanel Industries Co.,Ltd. have negotiated for debt restructuring with the financial institute creditor of company and subsidiaries company consisted of Thai Military Bank Public Company Limited, Bangkok Bank Public Company Limited, Krung Thai Bank Public Company Limited, Thai Farmer Bank Public Company Limited, The Industrial Corporation of Thailand and DBS Thai Danu Bank Public Company Limited, And agreed to sign in debt restructuring contract on December 29,1999 The creditor has agreed with favourable in conditions of debt payment to debtor, and to be postponed the payment period of credit. Also, summarized in conditions of debt payment as contract as followings: 1. The long term debt burden of company and subsidiaries company before debt restructuring on December 29, 1999 1.1 The debt burden - old (Thousand Baht) Principal Accrued interest Total Vanachai Group Public Company Limited and subsidiaries company - Thai Military Bank 2,142,487 177,264 2,319,751 - Bangkok Bank 1,291,008 195,689 1,486,697 - Krung Thai Bank 678,908 115,298 794,206 - Thai Farmer Bank 893,182 227,516 1,120,698 - IFCT 678,908 115,298 794,206 - DBS Thai Danu Bank 580,793 132,334 713,127 Total 6,265,286 963,399 7,228,685 1.2 The debt burden according with debt restructuring contract (Thousand Baht) Principal Reduced Accrued interest Total Vanachai Group Public Company Limited and subsidiaries company - Thai Military Bank 2,142,487 120,980 2,263,467 - Bangkok Bank 1,291,008 133,297 1,424,305 - Krung Thai Bank 678,908 85,967 764,875 - Thai Farmer Bank 893,182 176,715 1,069,897 - IFCT 678,908 85,967 764,875 - DBS Thai Danu Bank 580,793 101,060 681,853 Total 6,265,286 703,985 6,969,272 2. On the signature of debt restructuring contract date , Company and subsidiaries company has paid the principal and accrued interest as below (Thousand Baht) Principal Accrued interest Total Vanachai Group Public Company Limited and subsidiaries company - Thai Military Bank 159,092 - 159,092 - Bangkok Bank 95,865 - 95,865 - Krung Thai Bank 50,413 - 50,413 - Thai Farmer Bank 6,908 64,182 71,090 - IFCT 50,413 - 50,413 - DBS Thai Danu Bank 43,127 - 43,127 Total 405,818 64,182 470,000 3. The balance of long term debt burden after the signature of debt restructuring contract date (Thousand Baht) Debt restructuring Debt burden Part no1 Part no2 Part no3 Part no4 Part no5 Vanachai Group Public Company Limited and subsidiaries company - Thai Military Bank 2,104,375 104,933 1,658,620 219,841 60,490 60,490 - Bangkok Bank 1,328,440 63,230 999,442 132,471 66,649 66,649 - Krung Thai Bank 714,462 33,251 525,582 69,663 42,983 42,983 - Thai Farmer Bank 998,807 46,889 741,149 98,235 56,267 56,267 - IFCT 714,462 33,251 525,582 69,663 42,983 42,983 - DBS Thai Danu Bank 638,726 28,446 449,625 59,595 50,530 50,530 Total 6,499,272 310,000 4,900,000 649,468 319,902 319,902 Conditions of debt restructuring (by sumarized) with regarding the principal of loans and interest. Part no.1 The principal of loan amounts - Vanachai Group Public Company Limited will be 310,000 Thousand baht increase capital and issued newly-ordinary share amount 31,000,000 Share price 10 baht/ share to the creditors. For bringing the sales of share to pay the creditors (to completely operated within March 1, 2000) Before December 30, 2002 The Vanachai Group of Companyco.,Ltd. and/or Mr. Sompon Sahavat (Major Shareholder/Repurchaser) which is the creditors have agreed of buying the ordinary share from the creditors at 10 baht/share included with increasing payment at MLR (average of Thai Military Bank , Bangkok Bank and IFCT) of credit amount 80 M.Baht since, the creditors have paid the capital increase until the buying return date of ordinary share from the creditors or buying return at average value which price are valuable Part no.2 The principal of loan amount - Change to be long term loans, which pay to the 4,900,000 Thousand baht creditors within 12 years (at the end of every quarter) since January 1, 2000 Interest rate is MLR (average of Thai Military Bank, Bangkok Bank and IFCT) Part no.3 The principal of loan amount - Changing to be long term loans, which pay to 649,468 Thousand baht the creditors within 14 years since December 29, 1999 by divided the principal of loans payment to be 6 times according to the schedule and credit amount as follow: 1st 107,373 Thousand baht due date of loan payments on June 30, 2011 2nd 107,373 Thousand baht due date of loan payments on December 31,2011 3rd 119,143 Thousand baht due date of loan payments on June 30, 2012 4th 119,143 Thousand baht due date of loan payments on December 31, 2012 5th 98,219 Thousand baht due date of loan payments on June 30,2013 6th 98,217 Thousand baht due date of loan payments on December 31, 2013 1st year interest rate is 9.5% and 2nd year onwards is 10.4025% with accrued interest not later than one year the accrued interest has to add into the principal imediately. By suppose to be the principal payment and interest payment as same the interest rate as stated above until the principal payment has completely. Part no.4 Reduced accrued interest - To be paid within December 15,2014 amount 319,902 Thousand baht Part no.5 Reduced accrued interest - The creditors have agreed to reduce debt for amount 319,902 Thousand baht the debtor on the signature of debt restructuring contract date. In condition of, If the debtor breaks the contract the creditors have full authorized to cancell the condition of reduced interest and to ask for full amount interest payment. (Stock Exchange of Thailand 01-Feb-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. 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