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/raid1/www/Hosts/bankrupt/TCRAP_Public/000417.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, April 17, 2000, Vol. 3, No. 75 Headlines * A U S T R A L I A * BONLAC FOODS LTD: Outlook revised to negative SPORTSGIRL-SPORTSCRAFT GROUP: Deal would raise payout SPORTSGIRL-SPORTSCRAFT GROUP: Urges terms to creditors TELSTRA: Shares marked down, downgrade being considered * C H I N A & H O N G K O N G * CHI CHEUNG INVESTMENT: Creditor rejects debt proposal WHARF: Sets sights on debt market for $4.5b * I N D O N E S I A * PT BANK BALI: High court reinstates charges PT BANK SEJAHTERA UMUM: IBRA seeks to seize owner's assets PT NEWMONT MINAHASA: To lose $9M/mo. due to injunction PT OMETRACO : In process of liquidation, lawyer says PT PRASIDHA ANEKA NIAGA: Tells JSX of MOU PT SUMI ASIH: Denies IBRA debt amount in court * J A P A N * FUJITSU LTD.: Stock falls in wake of Nasdaq GLOBAL WAVE CO.: Files for bankruptcy HIKARI TSUSHIN INC.: Bond downgraded KAJIMA CORP.: Facing big pension shortfall KUMAGAI GUMI CO.: To post 18B Yen property-appraisal loss MITSUBISHI ELEC.CORP.: Closing pension gap NEC CORP.: Closing pension gap NIPPON MITSUBISHI OIL CO.: To post net loss on pension gap NIPPON SEISEN CO.: Puts penison shortfall at 3.2B Yen NTT DATA CORP.: Stock falls in wake of Nasdaq OBAYASHI CORP.: Facing big pension shortfall SEKISUI HOUSE LTD.: Posts 94B Yen net loss from landholding SHIMIZU CORP.: Facing big pension shortfall SOFTBANK CORP.: Stock sinks to low on news of share split SOGO CO.: Banks considers forgiving bad debt SONY CORP.: Stock falls in wake of Nasdaq TAISEI CORP.: Facing big pension shortfall TOKYO ELECTRIC POWER CO.: Pledges further debt cuts TOSHIBA CORP.: Closing pension gap * K O R E A * CJ INVESTMENT TRUST MGMT.CO.: FSS reprimands DAEWOO MOTOR: Hyundai,Kia Motors union workers end strike DAEWOO MOTOR: Bidding delayed a month KUKJE PRECISION: Creditors to swap debt for equity SAMSUNG MOTOR: Court Decision on debt rejected SEOUL BANK: Deutsche Bank agrees to bail it out TONG YANG ORION INVEST.TRUST CO.: FSS reprimands * M A L A Y S I A * MULTI PURPOSE HOLDINGS: Magnum deal off * P H I L I P P I N E S * BEST WORLD RESOURCES CORP.: SEC to recommend fraud charges NATIONAL STEEL CORP.: Pentium Funds offers to buy PHILIPPINE INT'L AIRWAYS: Decides to close down operations PHILIPPINE NAT.BANK: Sale risk grows as losses widen PHILIPPINE NAT.BANK: L.Tan to keep stake if May sale fails UNIOIL RESOURCES: Denies having liquidity problems VICTORIAS MILLING CORP.: Asks for more time to file plan * T H A I L A N D * BANGKOK METRO.BANK: Cuts bad loans, readying to privatize CHRISTIANI & NIELSEN: Reports debenture offer to SET NATURAL PARK PLC: 3 directors resign NATURAL PARK PLC: Applies for rehab, appoints planner SOMBOON GROUP: Restructure hoped to trigger revival THAI GYPSUM PRODUCT PLC: Court discharges rehab plan ================= A U S T R A L I A ================= BONLAC FOODS LTD: Outlook revised to negative --------------------------------------------- Standard & Poor's today affirmed its "BBB" long-term corporate credit rating on Bonlac Foods Ltd. (Bonlac) and revised the rating outlook to negative from stable. The outlook revision reflects concerns on Bonlac's continued high debt levels and the likely constraints on debt reduction, combined with concerns on the sustainability of Bonlac's supplier base given lower prices paid to Bonlac's milk suppliers relative to its competitors. Bonlac's borrowings increased in fiscal 1999 to A$513 million at June 30, 1999 (treating Bonlac's perpetual notes as debt) from A$420 million at June 30, 1998, reflecting in part the inclusion of A$54 million borrowings arising from the United Milk Tasmania Ltd. (UMT) merger, and capital expenditure of another A$56 million. This increase in borrowings saw total debt-to- capitalisation increase to 74.4% at June 30, 1999, from 69.9% in 1998. At Dec. 31, 1999, total debt was A$567 million, up from A$522 million at Dec. 31, 1998. Given the current historically low global dairy products prices, and consequent pressure on earnings, prospects for a significant reduction in gearing over the near term are limited. Bonlac has elected not to make a further step-up payment to its milk supplier shareholders this season. Standard & Poor's generally regards such decisions as evidence of the financial flexibility afforded by the company's cooperative-like structure. The two key aspects of the cooperative structure are a flexible milk payment policy, which provides some protection against adverse price movements, and that step-up payments are made after external commitments are met. However, the lower price being paid by Bonlac to its suppliers, compared with competing dairy manufacturing companies, has resulted in a progressive reduction in Bonlac's supplier base, and further dilution beyond the trend rate could occur. Bonlac's supplier base may become less stable, with a negative medium-term impact an shareholders' equity arising from share redemptions by former suppliers. Bonlac's rating was affirmed in January 2000, following the announcement that the company was exploring the potential for a merger with Australian Co-operative Foods Ltd. (Dairy Farmers). A merger likely would result in a stronger business position, reflecting potential synergies from largely complementary product ranges and increased geographic diversification. However, uncertainties exist on the resulting capital structure and ownership, and financial policies. The ratings on Bonlac reflect flexibility in price setting for its key raw material; low-cost large-scale manufacturing of dairy products; a strong domestic market position; and competitive export market position. However, offsetting these strengths are continued high debt levels and increasing focus on highly competitive markets for both branded export products and domestic beverages. Bonlac is one of the largest dairy groups in Australia, benefiting from economics of scale and strong brand names. Bonlac traditionally has benefited from a secure, low-cost, milk supply. Demand characteristics in Core business units- consumer dairy products and ingredients-are mature and stable. Bonlac his a significant presence in both the domestic and export markets. The company is focused an reducing its exposure to commodity export markets, which currently account for about 70% of exports, and progressively developing niche markets in higher value-added food ingredients. Although this export strategy is being implemented progressively, it exposes the company to higher-risk offshore markets and strong competition from multinational Players. Earnings for fiscal 1999 were adversely affected by lower global commodity prices. In recent years, Bonlac has undertaken significant capital expenditure on a predominantly debt-funded basis. The associated increased level of gearing has weakened credit protection measures. Standard & Poor's treats Bonlac's A$100 million perpetual unsecured notes as debt in its financial analysis; however, these note, which are redeemable solely at Bonlac's option, are viewed as providing a higher degree of financial flexibility than medium-term notes or commercial paper. The outlook is negative. Credit protection measures remain weak for the current rating, while gearing remains very high. If operating cash flow generation deteriorates as a result of further erosion of the supplier base end low global dairy prices, Bonlac's ability to reduce gearing from the current high levels will be diminished, and the rating could be lowered. (Sydney Morning Herald 14-April- 2000) SPORTSGIRL-SPORTCRAFT GROUP: Deal would raise payout ---------------------------------------------------- About 700 unsecured creditors of the failed Sportsgirl- Sportscraft Group are in line for a higher payout if they agree to a deal put forward by South African parent Truworths and the administrators of Sportsgirl. But the improved payout deal requires creditors to forfeit the right to make any future legal claims on the company's directors and related parties. Under a deed of company arrangement proposed by Truworths, unsecured creditors would receive a payout of between 27› and 39› in the dollar - compared with a range of 10› to 14› if SSG was placed into liquidation. Creditors will vote on the proposal at a meeting in Melbourne on April 26. Administrator Mr John Spark, from Ferrier Hodgson, said the deed proposal was an "all-in commercial settlement." But a number of creditors belonging to the SSG creditors' committee have opposed accepting the deed and had indicated they might vote for liquidation and litigation, he said. Under the deed, Truworths intends to give up about half of what it is entitled to out of the proceeds of the $23 million reaped from SSG asset sales over the past few months, in return for a release from any future claims against directors. The sum which Truworths would forgo amounts to about $4.5 million. The administrators estimated that if creditors pursued the matter through the courts it could cost between $5 million and $7 million and take up to four to six years. "It's a very clear choice," Mr Spark said. The administrators are compiling a separate report on the failure of SSG which will be forwarded to the Australian Securities and Investments Commission. "There has been no evidence of any substantive issues which at this stage I would consider the ASIC would be seriously interested in," Mr Spark said. A second creditors' report released on Friday showed the administrators stood to collect $2.26 million in fees for overseeing the SSG break-up and sale, should an extra payment of $300,000 be approved at the April 26 meeting. (Australian Financial Review 15-April-2000) SPORTSGIRL-SPORTSCRAFT GROUP: Urges terms to creditors ------------------------------------------------------ Creditors to the failed Sportsgirl-Sportscraft Group fashion chain are being urged to accept terms that shield the directors from legal action. Some creditors want to sue the directors for breach of duty and insolvent trading. Nearly all the retailer's businesses have been sold since November, when administrators were appointed to manage a company around $80 million in debt. The administrators, Ferrier Hodgson have spoken of poor accounting and financial management. Two months ago, they thought the 800 unsecured creditors, mainly suppliers, would receive between 12 and 23 cents in the dollar if the company were to be liquidated. The return is now estimated at between 27 and 39 cents, if creditors accept a so-called Deed of Company Arrangement, that protects Directors from further claims. A number of creditors say they will push for liquidation and legal action, at a vote later this month. But the administrators warn the costs of such action, if unsuccessful, could reduce the returns to nought. (ABC News Online 15-April- 2000) TELSTRA: Shares marked down, downgrade being considered ------------------------------------------------------- Telstra's share price slumped yesterday because of concerns that it paid too high a price to partner Hong Kong Internet and telephone company Pacific Century CyberWorks in their venture to create Asian mobile and cable network companies. Telstra will spend $5 billion in cash and contribute about $1.5 billion in assets in its partnership with CyberWorks, which is headed by 33-year-old entrepreneur Mr Richard Li and is close to finalising its $US38 billion ($63 billion) takeover of Hong Kong telephone company Cable & Wireless HKT. Telstra's ordinary shares fell as low as $7.37 before closing 23c down at $7.41, while the instalment receipts were 19c down at $4.48, or 2c below the issue price paid last October. CyberWorks' Hong Kong-listed shares ended $HK1.10 (23c) up at $HK16.50. Both major ratings agencies Moody's and Standard & Poor's put Telstra's debt securities on review for a possible downgrade. "While Standard & Poor's recognises the potential growth opportunities, stable cash flow generation is not expected as significant investment in infrastructure is likely to be required," the ratings agency said. "Accomplishment of satisfactory cash returns on the investment may take some time, and is not assured." Telstra will invest $US1.5 billion in CyberWorks convertible notes, equivalent to 2 per cent of its issued capital if the company's takeover of C&W HKT is successful. It will also pay $US1.5 billion for 40 per cent of a newly created company known as Regional Mobile Company, with the major asset been C&W HKT mobile operations. Also Telstra and C&W HKT will pool their respective undersea cable and International assets into a new joint venture. JB Were & Son telecommunications analyst Mr Craig Connelly said in a note to clients that he was sceptical of the $US4,000 ($6,666) to $US5,000 per subscriber Telstra effectively paid to gain an interest in the mobile phone business of Cable & Wireless HKT, in which CyberWorks is in the process of buying. The new regional mobile company will be 60:40 owned by CyberWorks and Telstra. Despite the concerns of the deal, telecommunications analysts endorsed Telstra's international strategy. They wanted more detail and expected Telstra's shares to rebound. Mr Connelly at JB Were said that the weakness in Telstra's share price was similar to the market reaction towards Telecom Corp of New Zealand when it bought 80 per cent of AAPT. Telecom NZ shares fell then, but have since risen by over 20 per cent. They hit a 12-month high on Monday. (Sydney Morning Herald 14-April-2000) ============================== C H I N A & H O N G K O N G ============================== CHI CHEUNG INVESTMENT: Creditor rejects debt proposal ----------------------------------------------------- The directors of Far East Consortium International Limited ("Far East"), through David Chiu, Deputy Chairman and Chief Executive Officer, refer to the joint announcements with Chi Cheung Investment Company, Limited ("Chi Cheung") dated 13th December, 1999, and 5th January, 2000 respectively in relation to the entering of heads of agreement between Chi Cheung and Far East Consortium Limited (a wholly owned subsidiary of Far East) regarding a debt restructuring proposal of Chi Cheung. The Proposal involves, among other things, the injection by Far East Consortium Limited of certain assets and debt restructuring of Chi Cheung. The directors of Far East wish to announce that as Far East and the major creditors of Chi Cheung are not able to agree the terms of the Proposal, Far East has on 7th April, 2000 served notice to Chi Cheung and its financial advisers to terminate the Proposal. Shareholders of Far East are advised to exercise caution in dealing in the securities of Far East. (Hong Kong Stock Exchange 14-April-2000) WHARF: Sets sights on debt market for $4.5b ------------------------------------------- Wharf plans to tap the debt market this month to raise HK$4.5 billion, according to bankers, for use as working capital and possibly to pay down other loans. The company was arranging a five-year unsecured loan, the bankers said. Earlier this month, it signed a HK$2 billion loan. The cost of the latest loan will be Hibor, plus nearly one basis point. Wharf will start repaying the loan at the end of the third year. Wharf had net debt of between HK$21 billion and HK$22 billion at the end of last year. Seven banks will be lead arrangers of the loan. They are BA Asia, BOC Asia, Citibank, Societe Generale, ABN Amro, DBS Bank and Rabobank. BA Asia is the sole arranger of the HK$2 billion loan. Analysts said they could not explain why Wharf wanted to raise such a large amount through loans. "Wharf can liquidate their HK$5 billion worth of stocks if they want money," one analyst said. The company could also cash in more than HK$7 billion by selling properties, they said. (South China Morning Post 15-April-2000) ================= I N D O N E S I A ================= PT BANK BALI: High court reinstates charges ------------------------------------------- An Indonesian high court reinstated an indictment against a key figure in the country's Bank Bali scandal. The Jakarta High Court reversed a lower court decision last month that ordered Indonesia's attorney general to drop corruption charges against Djoko Tjandra, an executive of a company politically linked to the former ruling party that received 546 billion rupiah ($71.8 million) from Bank Bali last year. The high court ordered the South Jakarta District Court to try Mr. Djoko in a written judgement following a closed- door hearing last Friday, according to Soedarto, a district court official. The high court ruling followed an appeal by the attorney general's office. The high court decisions is a rare judicial victory for President Abdurrahman Wahid's government, which has been struggling to prosecute individuals implicated in alleged corruption during the administrations of former Presidents Suharto and B.J Habibie. Late last month, for example, a different Jakarta court ruled the 1999 nationalization of Bank Bali by the government's Indonesian Bank Restructuring Agency was illegal. Mr. Djoko's company, PT Era Giat Prima, was controlled by individuals affiliated with the Golongan Karya party, or Golkar, which ruled Indonesia under Messrs. Suharto and Habibie. Era Giat Prima was paid 546 bilion rupiah by Bank Bali's former owners, ostensibly as a fee for helping the bank recover government guaranteed debts. Disclosure of the payment ignited a scandal, with Mr. Habibie's political rivals alleging that the Bank Bali money was used to fund Golkar's 1999 parliamentary election campaign. Era Giat Prima officials eventually returned the money and have denied any wrongdoing. But an audit completed by accounting firm PricewaterhouseCoopers in August found "numerous indicators of fraud" related to the transaction. The Bank Bali affair infuriated Indonesia's international financial backers - including the International Monetary Fund and the World Bank - and helped undermine Mr. Habibie's re-election campaign. Mr. Djoko was investigated by the attorney general's office and later indicted in connection with the Era Giat Prima transaction. But on March 6, the South Jakarta District Court dropped proceedings against Mr. Djoko on the grounds that it didn't have the authority to try the case. (The Asian Wall Street Journal 13-April-2000) PT BANK SEJAHTERA UMUM: IBRA seeks to seize owner's assets ---------------------------------------------------------- The Indonesian Bank Restructuring Agency (IBRA) has filed an application with the Jakarta Commercial Court to seize the assets of Johny Basuki, the owner of closed PT Bank Sejahtera Umum (SBU), after his failure to repay debts accumulated by the bank of 53 mln usd. "In order to avoid further losses, we are appealing to the commercial court to issue an order to seize the assets in the form of 57 certificates of land ownership," according to copies of documents obtained by AFX-Asia. (AFX News Limited 14-April-2000) PT NEWMONT MINAHASA: To lose $9M/mo. due to injunction ------------------------------------------------------ US-based gold mining company PT Newmont Minahasa Raya says it will suffer a production loss equal to US$9 million a month due to a local court injunction to stop operating. Because of the temporary closure order, the company was no longer able to turn out the 30,000 ounces of gold it had been producing every month so far (one ounce is worth US$300), said Newmont president Richard Ness. Speaking to the press here, Ness said his company had no choice but to accept the Tondano District Court's intermediary verdict which called for temporary cessation of its mining activity. He said the closure was also threatening the jobs of about 350 permanent and 750 contract workers. (Asia Pulse 13-April-2000) PT OMETRACO : In process of liquidation, lawyer says ---------------------------------------------------- PT Ometraco Corporation told the Jakarta Commercial Court on Thursday to turn down a bankruptcy petition filed by the Indonesian Bank Restructuring Agency (IBRA) as the company was already in the process of liquidation. "Ometraco cannot be declared bankrupt again here," said company lawyer Leonard Simorangkir during a court hearing. He said the company had declared itself bankrupt and registered the self- liquidation notice at the South Jakarta District Court on April 5. The lawyer representing IBRA, Benny K. Harman, said the self-liquidation notice at the other court did not automatically abolish the rights of the creditors to file at the Commercial Court. "Ometraco's legal status as a company has not been written off, so it can still be taken to the bankruptcy court," he said. The 1998 Bankruptcy Law stipulates that parties that can file for bankruptcy are individuals and companies which have legal names. Benny said the move by Ometraco to liquidate itself was done to anticipate IBRA's efforts in suing the company at the Jakarta Commercial Court. "The company's move to liquidate itself under the South Jakarta Court was based on bad faith," said Benny. He said the liquidation process under the South Jakarta Court was supervised by the concerned company's shareholders, while under the Commercial Court it would be under the creditors of the suing company. "For the creditors' sake, the liquidation process under the Commercial Court would indeed be more preferable than at the South Jakarta Court," he said. Ometraco owes IBRA $53.18 million. It operated its business on banks, property and telecommunications. The next hearing for Ometraco will continue on Monday. (The Jakarta Post 15-April-2000) PT PRASIDHA ANEKA NIAGA: Tells JSX of MOU ----------------------------------------- PT Prasidha Aneka Niaga Tbk through letter dated 12 April 2000, No.070/PAN/MT/IV/2000, reported to the Jakarta Stock Exchange that The company had signed a Memorandum of Understanding (MOU)of Credit Restructuring on 28 March 2000 with Bank Mandiri and Bank Mandiri. The Agreement regarding the Company's debt restructuring with Bank Mandiri will be further conducted because there are many things that should be discussed and approved together. If the agreement had been signed, the company will report to Bapepam, JSX, SSX and PRPM immediately, referring to the existing regulation. (Jakarta Stock Exchange 14-April-2000) PT SUMI ASIH: Denies IBRA debt amount in court ---------------------------------------------- At a separate hearing at the Jakarta Commercial Court on Thursday, crude palm oil producer PT Sumi Asih denied its debts to IBRA stood at $6.73 million, saying that the true amount should be $1.4 million. Sumi Asih and Ometraco are two of three companies that IBRA took to Jakarta Commercial Court in late March after they failed to settle their matured debts. A Latief is the other. (The Jakarta Post 15-April-2000) ========= J A P A N ========= FUJITSU LTD.: Stock falls in wake of Nasdaq NTT DATA CORP.: Stock falls in wake of Nasdaq SONY CORP.: Stock falls in wake of Nasdaq --------------------------------------------- Japanese stocks fell, led by Internet stocks such as Sony Corp., after U.S. March retail sales soared, fueling concern the Federal Reserve may have to raise interest rates to cool inflation. Sony fell 330 yen to 13,120, while NTT Data dropped 10,000 yen to 1.57 million and Fujitsu, Japan's No. 1 computer maker, slipped 85 yen to 2,915. NTT Data Corp. and Fujitsu Ltd. were also weighed down by a four-day, 17-percent decline by the Nasdaq Composite Index, as the outlook for higher U.S. rates prompted investors switch into stocks which have lower prices relative to their earnings. The broad Topix index fell 16.92, or 1 percent, to 1647.1. The Nikkei 225 stock average dropped 146.64, or 0.7 percent, to 20,379.78. "It's a tough environment for people who invest in growth" stocks, said Alex Muromcew, a portfolio manager at Loomis Sayles & Co., which manages $70 billion. "The strong economic numbers have enforced people's perception that the Fed will have to continue raising interest rates." (Bloomberg 13-April-2000) GLOBAL WAVE CO.: Files for bankruptcy ------------------------------------- A cell phone marketer affiliated with Hikari Tsushin Inc. (9435) filed for bankruptcy at the Tokyo District Court on Wednesday. Global Wave Co. based in Tokyo has been operating about 100 "HIT SHOP" cell phone outlets. Interest rate payments on loans apparently weighed on the company. The total debt owed by Global Wave amounts to 2.357 billion yen, according to private credit research agency Teikoku Databank Ltd. (Nikkei 13-April-2000) HIKARI TSUSHIN INC.: Bond downgraded ------------------------------------ Japan Rating and Investment Information Inc. (R&I) announced Wednesday that it has downgraded the long-term bond of Hikari Tsushin Inc. (9435) from BBB plus to BBB minus, the lowest in investment-qualified rates. The rating service firm also said it will continue what it calls rating monitor for a possible reassessment of the firm's credit standing. In justifying the downgrading, Japan Rating said Hikari Tsushin's cellular phone business is becoming unstable as a revenue source because of sluggish sales in the market. It also cited the growing financial risks involved in Hikari Tsushin's expanding investment in start-up firms with funds raised from outside, such as through bond issuances. The rating firm said a focal point in Hikari Tsushin's future management will be what measures it will hammer out to regain investor confidence. (Nikkei 13- April-2000) KAJIMA CORP.: Facing big pension shortfall OBAYASHI CORP.: Facing big pension shortfall SHIMIZU CORP.: Facing big pension shortfall TAISEI CORP.: Facing big pension shortfall -------------------------------------------- Taisei Corp. (1801), Obayashi Corp. (1802) and Shimizu Corp. (1803) are each estimated to be facing a 40-50 billion yen shortfall in pension and severance pay reserves for the year ended March, sources at the general contractors said Thursday. Taisei and Obayashi plan to cover the gap by the end of fiscal 2001. Another leading general contractor, Kajima Corp. (1812), is expected to have the lowest level of underfunding at 20-25 billion yen, mainly because it added about 40 billion yen to retirement reserves in fiscal 1998. Net profits at the four general contractors are likely to show significant declines in fiscal 1999 because of extraordinary losses incurred by devaluating holdings of real estate and stocks. Obayashi has a shortfall of some 40 billion yen in unfunded pension and retirement obligations, which stood at about 135 billion yen at the end of March, against 95 billion yen in reserves. "We plan to cover all of the shortfall in the current fiscal year," a company official said. Taisei still has a shortfall of 50 billion yen, even after boosting retirement pay reserves in fiscal 1999 and booking an extraordinary loss of 37 billion yen, company sources said. Shimizu has yet to decide how to cover the estimated 50 billion yen gap in its obligations, company officials said. (Nikkei 13-April-2000) KUMAGAI GUMI CO.: To post 18B Yen property-appraisal loss --------------------------------------------------------- Kumagai Gumi Co. (1861) appears set to post an appraisal loss of about 18 billion yen on its property holdings for the year ended March, company sources said Thursday. The market price of the property concerned has fallen 50% or more below its book value. The large general contractor is expected to report an extraordinary loss totaling 20 billion yen thanks to additional losses stemming from stockholdings and extra spending on restructuring efforts. Kumagai Gumi, however, is likely to post a net profit of about 2 billion yen, up 1.4 billion yen from a year ago, after selling part of its stock portfolio and adopting the deferred-tax accounting system. No dividend will be paid for the third straight year. The company held property for sale with a book value of 94.2 billion yen at the end of last September. Of this holding, the company posted an appraisal loss on real estate unlikely to recover from a 50% or more drop in market price. The contractor is expected to report pretax profit of some 5 billion yen, down 34%, compared with an earlier forecast of 7 billion yen. The revision is due to a 2 billion yen appraisal loss on its stockholdings. (Nikkei 13-April-2000) MITSUBISHI ELEC.CORP.: Closing pension gap NEC CORP.: Closing pension gap TOSHIBA CORP.: Closing pension gap ------------------------------------------ Three top electronics manufacturers aim to make progress in lowering their unfunded severance and pension liabilities this fiscal year by changing their retirement policies. Mitsubishi Electric Corp.'s (6503) payments increased by 2.5% a year under its old pension plan, so its group unfunded pension obligations swelled to 539.1 billion yen as of March 1999. The company changed its plan this month by switching to a fixed-payout system and lowering the assumed rate of return from 5.5% to 4%, reducing the shortfall by 180 billion yen. NEC Corp. (6701) also changed its pension plan this month to reduce payouts, and its group unfunded obligations should drop by about 50 billion yen from the March 1999 figure of 238.9 billion yen. Toshiba Corp. (6502) reduced its pension payments and assumed rate of return, so its group unfunded pension liabilities should shrink by 40-50 billion yen from 573.8 billion yen as of March 1999. (Nikkei 14-April-2000) NIPPON MITSUBISHI OIL CO.: To post net loss on pension gap ---------------------------------------------------------- Nippon Mitsubishi Oil Co. (5001) covered its entire group shortfall worth 23 billion yen in reserves for retirement pay and pension liabilities in the year ended March, company sources said Thursday. As a result, Japan's leading oil company estimates a consolidated net loss of 5 billion yen, compared with an initial forecast of 12 billion yen in profit. The company wanted to emphasize a more secure financial footing in the current year by wiping out the shortfall at one time. The oil company appears to have recorded an extraordinary loss of more than 30 billion yen, due to the shortfall coverage and special payments to early retirees last year. Group pretax profit is estimated to have totaled 33 billion yen, due mainly to strong earnings at oil-field development subsidiaries, as a result of higher crude oil prices. The company estimates parent-only net profit totaled 5 billion yen, down from an original forecast of 12 billion yen, because of the coverage of a 9 billion yen shortfall in the reserves for retirement pay and pension liabilities. The firm still expects to maintain an annual dividend of 7 yen. (Nikkei 14-April-2000) NIPPON SEISEN CO.: Puts penison shortfall at 3.2B Yen ----------------------------------------------------- Nippon Seisen Co. (5659), using a discount rate of 3.5%, estimates that its parent-company unfunded retirement liabilities total almost 3.22 billion yen. Nippon Seisen plans to take an extraordinary charge of 1.64 billion yen for the fiscal year ended March 31 to narrow the shortfall. This will leave the manufacturer of stainless steel wires with a net loss of 850 million yen. The nearly 1.58 billion yen in remaining unfunded pension and severance liabilities will be eliminated over a 15-year period starting in fiscal 2000. Nippon Seisen wants to spread out the charges in order to keep the impact on annual earnings to the smallest possible level. (Nikkei 14-April-2000) SEKISUI HOUSE LTD.: Posts 94B Yen net loss from landholding ----------------------------------------------------------- Sekisui House Ltd. (1928), a Japanese home builder, said Thursday it suffered a consolidated net loss of Y94.81 billion for the fiscal year ended Jan. 31, in contrast with the year-earlier profit of Y22.85 billion, due to valuation losses on landholdings. The company said the pace of growth in the nation's housing starts has slowed due to a rise in mortgage loan rates and fears about the economy's future course. Against that backdrop, consolidated sales grew 1.2% to Y1.330 trillion, while operating profit climbed 29% to Y76.14 billion, citing groupwide cost-cutting measures. Pretax profit surged 25% to Y70.10 billion. But the company reported a huge special loss totaling Y216.53 billion on a group basis, as it decided to write off valuation losses on land it intended to develop and resell. Falling land prices widened the gap between the land's prevailing value and the price at which it was originally bought. For this fiscal year through Jan. 31, 2001, the company expects a group net profit of Y33.50 billion and pretax profit of Y99.00 billion on sales of Y1.400 trillion. (Nikkei 13-April-2000) SOFTBANK CORP.: Stock sinks to low on news of share split --------------------------------------------------------- Softbank Corp. (9984) stock on Thursday went limit-down to a year-to-date low of 66,300 yen due to concerns that the issue's temporary decrease in value from an upcoming 3-for- 1 stock split will trigger margin calls for investors using the equity as collateral for margin trading. The Internet conglomerate on Wednesday announced that there will be a split for shareholders of record on April 25, resulting in the share price theoretically dropping to one- third its previous level and remaining at that level until June 23, when the new shares will be handed over to shareholders. Investors who have been using Softbank stock as collateral for margin trades will "have the same number of shares, but see the price level slump by two-thirds," says a Tokyo Stock Exchange official. As a result, those investors may face a temporary shortfall in collateral. The split is being executed to boost tradings in Softbank stock through lower share prices. But with the issue undergoing a correction, "investors were worried about selling to convert Softbank shares being used as collateral into cash, in order to avoid margin calls," says a Daiwa Securities Co. official. (Nikkei 14-April-2000) SOGO CO.: Banks considers forgiving bad debt -------------------------------------------- Japan's major banks are scrambling to dispose of bad loans, and the country's top 17 banks are believed to have forgiven roughly 1.4 trillion yen in bad debt in the fiscal year ended March 31, The Nihon Keizai Shimbun learned Thursday. If the Sogo Co. (8243) group's creditor banks write off the 639 billion yen in debt waivers requested by the struggling department store operator for fiscal 1999, that figure will rise to close to 2 trillion yen, exceeding a record 1.6 trillion yen in debt forgiveness seen in fiscal 1998. The high level of debt waivers reflects a growing number of corporate failures amid the prolonged economic slowdown, as well as the banks' active bailing out of ailing clients and affiliates. Banks sometimes forgive part of their loans voluntarily to help clients or affiliated companies restructure operations. At other times, they are forced to accept debt waivers under the rehabilitation plan of a failed corporation to which they have extended loans. The 17 banks have announced combined debt waivers of 926.3 billion yen so far in 2000. Some 267.3 billion yen in loans, or just below 30% of the total, has been forgiven to dispose of bad loans at these banks' subsidiaries or affiliates. This year, Sakura Bank (8314) forgave a total of 143.9 billion yen in loans to four of its subsidiaries. Tokai Bank (8321) abandoned 169.5 billion yen in credit to trading company Tomen Corp. (8003). Mitsubishi Trust & Banking Corp. (8402) and Sumitomo Trust & Banking Co. (8403) gave up 80.6 billion yen and 73.6 billion yen, respectively, in loans to Nippon Asset Management Inc. under the failed firm's rehabilitation plan. (Nikkei 14- April-2000) TOKYO ELECTRIC POWER CO.: Pledges further debt cuts --------------------------------------------------- Tokyo Electric Power Co. (9501) will reduce its interest- bearing debt by more than 200 billion yen in the year ending March 2001 after cutting liabilities by just over 290 billion yen in fiscal 1999, company sources said Thursday. The debt cut in fiscal 1999 was far larger than projected. As a result, its outstanding debt balance is expected to fall below 10 trillion yen at the end of March 2001 to the lowest level in six years. This compares with 10.19 trillion yen at the end of March 2000. Efforts to reduce debt will include cuts in capital spending plans and sale of idle land, including company housing. It has revised down its projected capital spending of 1.07 trillion yen for fiscal 2000 by more than 100 billion yen. The company also plans to securitize some of its real estate holdings by the end of fiscal 2000. In fiscal 1999, the company cut its projected capital spending by 180 billion yen from the original plan in a bid to lower debt. As a result, its free cash flow stood at 380 billion yen at the end of March, up 170 billion yen from a year earlier. Free cash flow is the net cash left after cash spending on investment activities is subtracted from cash generated from operations. The move indicates the company's desire to strengthen its fragile financial base amid the deregulation of the electricity market, the sources said. (Nikkei 13-April- 2000) ========= K O R E A ========= CJ INVESTMENT TRUST MGMT.CO.: FSS reprimands TONG YANG ORION INVEST.TRUST CO.: FSS reprimands ------------------------------------------------ The Financial Supervisory Service said yesterday it has reprimanded Tong Yang Orion Investment Trust Co. and CJ Investment Trust Management Co. and their top management for their illegal activities committed in 1998. According to the FSS, Tong Yang was found to have arbitrarily adjusted the yield rates of the trust funds it managed by reshuffling bond portfolios. Using a so-called bad fund set up without the approval of the supervisory body, the company took out nonperforming bonds from trust funds with below-average yield rates to those with above- average rates. Tong Yang also adjusted yield rates of trust funds by selling bondholdings to a third party above market rates in return for purchasing from him commercial paper (CP) issued by Daewoo Corp. above their fair values. The trust company was also charged with lending customers' funds to its sister firm Tong Yang Securities in excess of the legal limits. An FSS official said the illegal rebalancing of bond portfolios among trust funds was found not just in Tong Yang but all of the six investment trust companies which set up and operate a bad fund at the time. "They were found to have committed this and other types of blatantly illegal practices," said Moon Hong-soon, an official in charge of overseeing trust companies' asset management. "Investors who suffered losses because of arbitrary yield adjustments by trust firms can file damage suits." CJ Investment Trust Management also set up and operated a bad fund without the approval of the FSS to facilitate artificial adjustment of yield rates among trust funds under its management. The company was also found to have lent customers' funds to its sister brokerage firm in excess of legal limits. It also included in the portfolios of its money market funds (MMFs) bonds with speculative- grade bonds. Meanwhile, market watchers said the authority's sanctions imposed on the two trust management firms were too soft to give any impact. "The FSS has been criticized for pulling its punches against financial institutions which were found to have hurt customers' interests through illegal activities. This time again, this criticism proved warranted," a critic said. "The illegal practices committed by the trust firms deserve revocation of their licenses. It may be necessary to mete out harsh penalties to some law breakers to make the supervisory authority's commitment to law enforcement credible." (The Korea Herald 15-April-2000) DAEWOO MOTOR: Hyundai,Kia Motors union workers end strike --------------------------------------------------------- Unionized workers of Hyundai and Kia Motors went back to work, ending a strike which the government had declared to be illegal. The Hyundai union said it decided to return to a normal work schedule through April 19, and will try to negotiate with management. Kia unionists decided to resume an eight- hour work schedule yesterday and will decide on a future course of action after reviewing the outcome of a special labor-management council on Monday. However, the unions of Daewoo and Ssangyong will continue their partial strike against the sale of Daewoo Motor to a foreign buyer. (The Korea Herald 15-April-2000) DAEWOO MOTOR: Bidding delayed a month ------------------------------------- The proposed plan to sell off the ailing Daewoo Motor has been delayed about a month behind its original schedule. The Daewoo Restructuring Coordination Committee (DRCC), the joint government and creditor banks body in charge of the international auction, said Friday that the firm's consolidated financial statements would be forwarded to bidders after the middle of April. The committee had originally planned to send the statements before the end of March, but said the preparation of the documents has been delayed for about a month. GM, Ford, DaimlerChrysler, Hyundai and Fiat are the five local and international bidders participating in the bidding process. The CRCC said it would select the preferred negotiation partner by the end of June, according to the revised schedule. (Digital Chosun 14-April-2000) KUKJE PRECISION: Creditors to swap debt for equity -------------------------------------------------- Creditors agreed to swap debts into equity investment in Kukje Precision, which is under court protection. The company's 11 creditor banks informed the Kosdaq stock market that it will convert all rescheduled debts and mortgage to a rights offering of around 6 billion won. The conversion takes place Saturday and new shares will be issued April 24. (The Korea Herald 15-April-2000) SAMSUNG MOTOR: Court Decision on debt rejected ---------------------------------------------- The creditors of Samsung Motor have rejected the results of court mediation on the issue of the firm's debts, leading to expectations that negotiations for the sale of the firm to Renault will be further delayed. The Pusan district court had made a final proposal that Samsung Motor creditors and Samsung Corp. share the proceeds from the sell off of Samsung Motor in proportion to their respective W500 billion and W218.3 billion in loans to the firm. Samsung creditors notified the court Thursday of its rejection of the proposal. Meanwhile, Samsung Corp. has indicated that it is satisfied with the court's recommendation. (Digital Chosun 13-April-2000) SEOUL BANK: Deutsche Bank agrees to bail it out ----------------------------------------------- The sinking Seoul Bank finally received assistance and hope for a turnaround more than two years after it sent out an SOS, with Deutsche Bank agreeing to provide restructuring and financial consulting. The Financial Supervisory Commission (FSC) and Deutsche Bank separately issued statements Friday that they signed a memorandum calling for the German bank to provide technical assistance to Seoul Bank. Under the contract, the German bank will send restructuring experts to Seoul Bank to conduct studies on the latter's corporate banking, retail banking and treasury operations, risk management and back office that covers corporate governance, information technology, logistics, operation and audit and compliance. Its service is limited to technical assistance, or advisory capacity, to help the bank and the government map out a restructuring plan in line with international practices and does not involve equity investment, and thus no management control, an FSC spokesman said. The two sides did not set a date on how long Deutsche will serve as an advisor and that its recommendations and advice are not legally binding. "We assume Deutsche will help up turn around the bank as early as possible," he added. Deutsche Bank's chief country officer in Seoul said in a press release that the bank would advise the government in its selection of a new chief executive and senior management team. The government initially hoped the German bank, one of the world's largest, thanks to its merger with Bankers Trust of the United States last July, will invest in Seoul Bank and assume management to cap the Seoul Bank problem delayed since HongKong Shanghai Banking Corp. pulled out of the bidding last August. Deutsche, which lately broke off merger talks with the Dresdner Bank, is credited with turning around Indonesia's banking sector by merging four ailing banks into Bank Mandiri, which is doing well after two years in business. The sale of the Seoul Bank was a part of reform promises to the International Monetary Fund, which arranged a $ US58.35 billion bailout in late 1997 at the height of the currency crisis. The bank was nationalized in December 1997 and the government has been working on its sale since early 1998 after injecting initial public funds of 1.5 trillion won ($ US1.3 billion). The government has been searching for a foreign buyer since sales talks with HSBC broke off in August last year after six months of negotiations. Additional public funds of 3.3 trillion won were injected last September to rescue Seoul Bank from another bankruptcy. The bank has been drowning ever since, losing clients and creditability from home and abroad. Consulting from Deutsche Bank could prove to be its life preserver. But Bank experts say the fact that contract between the FSC and Deutsche Bank is not legally binding, limits the extent of what the German bank can do for the Korean bank. "Consulting from Deutsche Bank will help improve Seoul Bank's credibility," an FSC official said. But many believe it is not enough to save the bank, which has already cost taxpayers nearly 5 trillion won to clean up. If Deutsche suddenly wants to pull out from restructuring, and it can do so under the unbinding contract, the situation with Seoul Bank will go back to square one and cost more tax money. Whether the Deutsche Bank-led restructuring proves successful, the Seoul Bank is likely to streamline its staff and organization under the German bank's restructuring plans and the government may have to inject additional public funds to assist the process. (Asia Pulse 14-April-2000) =============== M A L A Y S I A =============== MULTI PURPOSE HOLDINGS: Magnum deal off --------------------------------------- Multi-Purpose Holdings Bhd has terminated the deal to dispose of its 30.3 per cent stake in Magnum Corporation Bhd to Yanyu Sdn Bhd and Tan Sri Lim Yan Hai. It said the termination was due to the failure to fulfil some of the conditions stated in the share purchase agreement before the cut-off date. The agreement was dated July 15, 1999. "... the board had at a meeting held on April 14, decided not to extend the cut-off date referred to in the share purchase agreement. Accordingly, the share purchase agreement dated April 15, 1999 between the company, Yanyu and Lim, in relation to the proposed disposal is deemed to be terminated on April 15," MPHB told the Kuala Lumpur Stock Exchange. The statement did not elaborate on the conditions that led to termination. On July 15 last year, Amanah Merchant Bank Bhd announced on behalf of MPHB that the company was to sell to Yanyu 455.98 million shares of RM0.50 each, representing 30.3 per cent interest in Magnum Corporation for RM1.37 billion cash. Simultaneously, Yanyu would be disposed of to Bolton Bhd for the same price. This would be paid by the issuance of 130,000 million new shares by Bolton at an issue price of RM3 each and RM977.9 million nominal value of irredeemable convertible unsecured loan stocks in Bolton. Lim, Bolton's managing director, is the sole beneficiary shareholder of Yanyu for the proposed disposal. MPHB had intended to utilise the proceeds from the disposal of Magnum to repay its bank borrowings. In a separate development, MPHB and Malaysian Plantations Bhd jointly announced the appointment of Dr Chan Chin Cheung as the new chairman of both companies with effect from yesterday. Chan was the former director of Kamunting Corporation Bhd and Renong Bhd. Both Magnum and MPHB were suspended for yesterday's afternoon session, and would resume trading on Monday. Magnum ended the day at RM2.81, down one sen with 590,000 shares changing hands. MPHB was also down one sen to RM1.75 with 99,000 shares traded. Bolton was down eight sen to RM2.74, with 1.65 million shares traded. (E-media 15- April-2000) ===================== P H I L I P P I N E S ===================== BEST WORLD RESOURCES CORP.: SEC to recommend fraud charges ---------------------------------------------------------- The Securities and Exchange Commission (SEC) will recommend for prosecution to the Department of Justice (DOJ) two more brokers and two individuals for stock fraud and price manipulation of gaming firm Best World Resources Corp. (BW). SEC Chairman Lilia Bautista, said the new names will be submitted to the DOJ next week which will then conduct a preliminary investigation to determine if criminal charges will be filed. At the same time, the SEC's prosecution and enforcement department has sent notices to 20 more individuals, informing them that they are being investigated for their alleged participation in illegal stock trading activities involving BW. Bautista said the SEC is continuing its investigation of possible participants in BW, and this time, is not relaying on the report submitted by the compliance and surveillance group of the Philippine Stock Exchange which has been prohibited by the Court of Appeals. Last week, the SEC turned over a new partial report to the DOJ naming presidential friend Dante T. Lim, Jimmy Juan, Eduardo "Moonie" Lim Jr., former president of BW and five broker firms for alleged illegal stock trading of the gaming firm. The report stated it had sufficient basis to refer the following persons and entities to the DOJ for prosecution: Dante T. Tan, president of Best World Gaming and Entertainment Corp. whose company folded in with BW through a share-swap agreement; Jimmy Juan, BW stockholder and alleged dummy of Tan. The two were found to have violated the Revised Securities Act with respect to price manipulation. Eduardo Lim, Jr., on the other hand, was found violating the broker-director rule. The five broker firms cited for complicity in price manipulation are Aurora Securities Inc.: SEC 2000, Inc., PNB Securities Inc.; Mark Securities Corp. and Belson Securities Inc. The partial report shows that in several instances, Tan through several broker firms, committed violations such as wash sale wherein the buyer and seller are the same and there is no change in beneficial ownership. Tan was also cited for several done through transactions wherein the buying/selling broker places its order through another broker for the account of its client. While this is not prohibited under the law and rules, if the same is resorted to as a design to create an active market activity of a particular stock, that will tend to show in the mind of investors that there is a public demand for such stock, then it becomes a manipulate device under the provision of Section 27 of the RSA. Lim Jr. was cited for violation of the broker-director rule. He resigned at the height of the BW scandal, after the Senate committee on banks and financial institutions which was conducting its own probe, said Lim could be liable for perjury and violation of the broker-director, rule of the RSA. Lim is the son of chairman emeritus Eduardo Lim Jr. of the PSE. His uncle Federico Lim is president of Belson Securities Inc. Earlier, Sen. Raul Roco said Lim lied before the Senate when he claimed that he has stopped being an official of Belson when he took over as president of BW. Roco noted that Lim, president and director of BW, was also a director of Belson Securities Inc. A person who violates the broker-director rule could be penalized from between P5,000 to P500,000 depending on the gravity of the offense and could face seven to 21 years imprisonment. Bautista said the SEC, in the course of its investigation, is stumbling on more names and thus, the probe is being expanded. She added that those persons whose names in the old PED report did not appear in the new partial report are not yet off the hook. (The Philippine Star 14-April-2000) NATIONAL STEEL CORP.: Pentium Funds offers to buy ------------------------------------------------- Pentium Fund has offered to buy National Steel Corp, said a finance department official, who asked not to be named. The official gave no other details. Separately, Philippine National Bank senior executive vice president Santiago Cua said it could be possible that Pentium Fund is only acting as a broker for a real buyer. PNB is National Steel's major creditor. Cua said he believes National Steel "will be taken over by another company in the same industry. I don't think a fund manager would just come in and take over." (AFX News Limited 13-April-2000) PHILIPPINE INT'L AIRWAYS: Decides to close down operations ---------------------------------------------------------- It looks like Gatchalian-owned Philippine International Airways, Inc. (PhilAir) decided not to wait any longer for that much-delayed license from the government. BusinessWorld learned from an industry source that after the airline firm closed down operations in February, it has no more immediate plans to revive its application to the Civil Aeronautics Board (CAB). "The (company's) objective (in setting up an airline business) is really OK to be known in the tourism business. However, there are external pressures on PhilAir's application that its approval took longer than expected. The Gatchalians do not have the luxury of time to wait long," the source said. The CAB earlier reasoned oppositions from Philippine Airlines (PAL) and Air Philippines as the cause for the delay in the hearings for PhilAir's license. The company filed its application in May last year. Although PhilAir earlier denied they are on the brink of closure, the company's move to stop in-flight training activities in February was already an indication that it was financially burdened by the delays. PhilAir was complaining of 2 million to 5 million Philippine pesos (PhP) (US$48,643 to US$121,607 at PhP41.116:US$1)losses a month on salaries of regular employees and cabin personnel. The amount was said to exclude the maintenance and repair of 15 Boeing 737-200s, which were then just lying idle in a hangar in Subic, Olongapo and in Louisiana in the US. The source said the company has already started selling the planes. PhilAir senior vice-president for finance and administration Morris B. Pineda was earlier quoted as saying they cannot continue with the training of staff and employees unless they have the license. BusinessWorld tried to reach Mr. Pineda but was not immediately available for comment. "Technically, PhiIAir did not really stop its operations because it has not started operations in the first place," the source added. The source added the Gatchalians cannot afford to wait for PhilAir's license for long as it is reorganizing its businesses. He added that Waterfront Philippines, also a part of the Wellex group, is also selling its luxury shipping liner to save on administrative costs. "If you recall, they bought Davao Insular and Fort Ilocandia last year. They were even trying to spin off Wellex from an industry firm into an e-commerce (electronic commerce) company so there is now some reorganization on the part of the company on whether it is the right time to go into (the transport) business," the source said. For CAB's part, deputy executive director Francis Anthony Navarette said in a telephone interview that it will not be fair to point an accusing finger on them for the airline's closure. "Costs (while awaiting license approvals) are but normal complaints. There were several oppositors to their entry and on our part, we cannot just cut short the process," said Mr. Navarette. The CAB official added he has not received any report on the status of PhilAir's operations, saying the last they heard from the firm was when it was asked to change its logo and refrain from using the shortened name PhilAir. CAB issued the order so as not to confuse with PAL and an airport taxi operator also named PhilAir. (Business World 14-April-2000) PHILIPPINE NAT.BANK: Sale risk grows as losses widen ---------------------------------------------------- The net loss at Philippine National Bank (PNB) widened last year, highlighting the risks for potential buyers of the bank, scheduled for full privatisation in the first half of this year. It also makes it more difficult for the government and the bank's majority shareholder, tobacco and airline magnate Lucio Tan, to stick to their original asking price of 160 pesos a share in selling their combined stake. PNB yesterday said last year's net loss was 9.87 billion pesos (about HK$1.86 billion) against a loss of 7.25 billion pesos a year earlier. The loan portfolio shrunk 23.5 per cent and provisions for probable bad debts and other losses remained high at 8.52 billion pesos. The Estimate Directory placed net loss consensus for PNB in 1999 at 237 million pesos. PNB said that at the end of last year, its non-performing loans were 29 per cent of the loan portfolio. The industry ratio is about 12.34 per cent. Ismael Pili, regional banking analyst at W I Carr Securities in Singapore, thought PNB might have set aside high provisions for bad loans to clean up its books and provide potential buyers a fresh start. "They can say we did this so that it will be a clean book when someone wants to buy it." The bank plans to reduce the level of its non-performing loans this year through various schemes and to dispose of non-performing assets with a book value worth 4.6 billion pesos. It also planned to undertake more aggressive campaigns to raise at least 25 billion pesos in new deposits. The Philippine Government has set a May 15 deadline for the sale of its PNB stake, together with the holding of Mr Tan. Analysts said it could be too narrow a time frame for potential buyers to finish a due diligence of the bank. The government, which owns 30 per cent, and Mr Tan, holding a controlling stake of 46 per cent, plan to sell their interests in PNB in one transaction to command a higher valuation. Mr Tan wants to sell their combined stake in the bank at 160 pesos a share to cover his carrying cost of about 158 pesos. He got his bank shares through a stock rights offering last September. (South China Morning Post 14- April-2000) PHILIPPINE NAT.BANK: L.Tan to keep stake if May sale fails ---------------------------------------------------------- Despite putting out a seller's face, Lucio C. Tan may still end up owning -- and running -- semiprivate Philippine National Bank (PNB) if nobody shows up at the scheduled May 15 bidding for 76% of the bank. "If the bidding fails, Mr. Tan will still be holding his stake in the bank," PNB president Feliciano L. Miranda yesterday told a news conference at the Tan-owned Century Park Sheraton, when asked about the tycoon's options. Mr. Miranda reiterated that the Chinese-Filipino tycoon, now PNB's biggest shareholder, will only unload his 46% stake at a one-time selling effort. In the event of a failed bid, Mr. Tan and the government will "go separate ways", he said. He refused to say, however, whether Mr. Tan will make an effort to sell his PNB stake on his own in the event of a failed auction. "That is our principal stockholder's prerogative," he said. Earlier, Finance Secretary Jose T. Pardo acknowledged that Mr. Tan's ownership position in PNB is "stronger than that of the government's" since the tycoon controls the single- biggest block of shares in the bank. "He doesn't even need (additional shares) to control the bank," he said. Mr. Pardo, however, denied that Mr. Tan intended to hold on to PNB in order to merge it with Allied Banking Corp., which the tycoon owns. "He cannot merge it with Allied Bank because it has a sequestration case," Mr. Pardo had said. At the press conference, the bank announced a net loss of 9.87 billion Philippine pesos (PhP) (US$240 million at PhP41.116:US$1), due primarily to PhP8.5 billion ($206 million) in loan loss reserves and a PhP2.9-billion ($70.5 million) income tax expense. Mr. Miranda admitted PNB's capital adequacy ratio (CAR) -- the ratio of the bank's risk assets versus its capital base -- stood at only 6% as of end-1999, below the minimum CAR level of 10% mandated by the Bangko Sentral (Central Bank of the Philippines) and the 8% internationally prescribed. Mr. Miranda said PNB's shareholders -- either Mr. Tan or a new owner -- will have to put up "at least PhP6 billion ($146 million) in fresh capital" to make the bank compliant with Bangko Sentral rules. Of this amount, he said, up to PhP4 billion ($97.30 million) may come from an appraisal surplus that the bank will record if it adjusts the value of its present head office building. PNB director Enrique G. Filamor said the fresh capital is needed on top of the PhP9.47 billion ($230 million) the bank raised via a stock right offer last year, which has already been wiped out by bad-debt provisioning. PNB originally earmarked the new funds for more aggressive lending operations, but the plan was scrapped due to the steady deterioration of its loan portfolio. Mr. Filamor said that as of end-1999, PNB has PhP21.7 billion ($528 million) worth of acquired assets, for which it had to provide PhP7 billion ($170 million) in reserves. The PNB director also said the bank is now in talks with its debtors. "We are even willing to provide cash flow support as long as they put up additional collateral," he said. "Otherwise, we refer them to our aggressive legal department which immediately initiates foreclosure proceedings," Mr. Filamor warned. Mr. Miranda said Mr. Tan has mapped out an eight-point action plan for the bank, which include: ú collecting its non-performing loans, estimated at 29% of total loans; ú selling off some 40,000 items of acquired assets worth PhP21.7 billion ($528 million); ú refocusing on loans of PhP50 million ($1.20 million) and below; and, ú disallowing "political loans". "Because of this, we hope to turn around this year, and post a profit by 2001," Mr. Miranda said. (Business World 14-April-2000) UNIOIL RESOURCES: Denies having liquidity problems -------------------------------------------------- Publicly-listed Unioil Resources & Holdings Company, Inc has denied reports that it is experiencing liquidity problems after its wholly-owned subsidiary, Westmont Investment Corporation's (Wincorp), extended some 5.5 billion pesos (US$ 134.15 million) in loans to at least four companies which were believed to be associated with former Finance Secretary Edgardo B Espiritu. Wincorp's reaction came after the Philippine Stock Exchange (PSE) asked Wincorp whether its financial condition was affected by published reports which alleged that Wincorp suffered liquidity problems due to the Wincorp loan mess. According to its Corporate Secretary Nemesio R Briones, the company could not shed light on the extent of the mess considering that it has not yet received the relevant financial statements from Wincorp itself. "We shall be able to determine the effect of Wincorp's financial situation only after we shall have received its final audited financial statements and consolidated the same with the financial performance of the other subsidiaries," Briones said. It was learned that it was Westmont Bank, headed by Mr. John Espiritu, which extended huge credit to Wincorp. Wincorp allegedly used Pearlbank Securities, Inc. as one of its creditors, which appeared to have borrowed a total of P274 million from Wincorp. Consequently, Wincorp's 2000 financiers pulled out their investments after they learned that Wincorp is faced with liquidity problems due to these loans. But in its complaint to the Securities and Exchange Commission (SEC), Pearlbank said it was only made to appear that it borrowed that much from Wincorp in exchange for securities placements for its investors. As this developed, SEC created a special task force which would look into the allegations of officers of both companies. (Asia Pulse 13-April-2000) VICTORIAS MILLING CORP.: Asks for more time to file plan -------------------------------------------------------- Victorias Milling Corp said it has asked the Securities and Exchange Commission for more time or up to May 15 to file an alternative rehabilitation plan. Victorias earlier petitioned the SEC for a period of until April 28 within which to submit the alternative plan. But the company said it will be unable to submit the plan within the prescribed period pending completion of a review by its creditors. (AFX News Limited 14-April-2000) =============== T H A I L A N D =============== BANGKOK METRO.BANK: Cuts bad loans, readying to privatize --------------------------------------------------------- Bangkok Metropolitan Bank (BMB) has succeeded in cutting its non-performing loans to 116 billion baht or 63% of total credit outstanding as of the end of February. Bad loans had dropped from 118 billion baht or 66% recorded as of Dec 31, according to president Somchai Sakuksurarai. Although the non-performing loans were declining steadily each month, the level was still relatively high, he said. As a result, the bank was making an average loss of 250 million baht monthly. As the bank's equity was already about six billion baht in the red, Mr Somchai said he wanted the privatisation of BMB to be completed as soon as possible in order to stop its equity from dipping further. He said the delays so far could be attributed mainly to the change in calculating figures used in the negotiations. They were now based on the performance ending in December 1999 instead of June 1999. "Recapitalisation is the best alternative to help the bank survive on its own. I assume that the privatisation of the bank is now in its final stage, which will be completed soon," said Mr Somchai. The privatisation of state-owned banks is part of the banking reform package initiated by the government to achieve full liberalisation of the banking sector. Mr Somchai said he hoped that after the privatisation of weaker banks was completed, the government would consider extending additional assistance to help them survive. (Bangkok Post 14-April-2000) CHRISTIANI & NIELSEN: Reports debenture offer to SET ---------------------------------------------------- Christiani & Nielsen, a Thai Public Company Limited, through Mr. Danuch Yontararak, Director and Secretary, informs the Stock Exchange of Thailand that the company has already redeemed 1,864,463 units of debentures (Baht 1,864,463,000) and the remaining 335,537 units (Baht 335,537,000) have not been redeemed. (Stock Exchange of Thailand 12-April-2000) NATURAL PARK PLC: 3 directors resign ------------------------------------ The company, through Mr.Tharagant Protpagorn, Director, reported to the Stock Exchange of Thailand the resignation of three company directors by reason of their regular work load, which possibly resulted in their imperfect performance as directors with details as follows: 1. Mr.Suebtrakul Soonthornthum resigning from Chairman of the Audit Committee and Independent Director; 2. Mr.Sakthip Krairiksh resigning from the Audit Committee and Independent Director; and 3. Mr.Chinnawat Bulsuk resigning from the Director. The resignations were effective April 9,2000. (Stock Exchange of Thailand 11-April-2000) NATURAL PARK PLC: Applies for rehab, appoints planner ----------------------------------------------------- Tharagant Protpagorn, Director, reported to the Stock Exchange of Thailand that the company Natural Park Plc, as a debtor, has filed the petition to the central bankruptcy court on the 10th April, 2000 in order to have the court approve the rehabilitation process. The date the petition will be on trial was appointed on the 1st May, 2000 by the court. The company appointed D.S. Prudential Management Co., Ltd. as its financial advisor (F/A). F/A commented that the debts of the company could be restructured which result in the appropriate debt to revenue ratio, as well as new cash injection by capital increasing or other means in order to develop the unfinished project. Then the company could be rehabilitated and viable. The details of the plan will be made after the court orders to appoint the planner. The company's planner is NPK Management Service Co., Ltd., 88 Sukhumvit Road (Soi Sukhumvit 49), Klongtan Nua, Wattana, Bangkok. The company's managing director is Mr. Thosapong Jaruthavee, a Thai born 19 December 1955. He was educated at Suan-kularb School and has a Bachelors degree in Engineering. He is on the faculty of Engineering, Chulalongkorn University. A second director is Mr. Taragant Protpakorn, a Thai born 19 March 1954. He also attended Suan-kularb School, and has his Bachelors degree in Pharmacy. He currently is on the faculty of Pharmacy, Chulalongkorn University. A third company director is Mr. Suwan Thanombooncharoen, a Thai born 1 June 1957. He also attended Suan-kularb School and has his Bachelors degree in Pharmacy. He likewise is on the faculty of Pharmacy, Chulalongkorn University. (Stock Exchange Of Thailand 12-April-2000) SOMBOON GROUP: Restructure hoped to trigger revival --------------------------------------------------- The Somboon Group, the country's third-largest auto-parts company, hopes its restructuring will trigger a revival of the company's fortunes. The company has become a model for the industry, emerging from its economic crisis with a sharper business focus and debt restructuring nearly completed. More than 600 auto- parts companies have been closed or taken over by foreign interests since the crisis struck in 1997. The Somboon Group had problems of its own, chiefly 3.5 billion baht in debt. However, an agreement with Bangkok Bank to restructure the debt was tentatively scheduled to be signed by the end of this month, said president Yongkiat Kiatphanich. Under the agreement, 70% of the foreign-currency debt will be converted to baht and the repayments, originally due this year, will be rescheduled over five years. The interest rate will also be cut by one to two percentage points from the current minimum lending rate plus one point. A business-rehabilitation plan that forms part of the agreement will require the group to increase exports to 30% of sales this year from 10%. Total sales are expected to rise to 1.5 billion baht from 1.2 billion last year. Mr Yongkiat said the group's 16 subsidiaries had been reorganised into just three, focusing on core businesses for flexible and quick operation. The three companies are Bangkok Spring Industrial Co, Somboon Malleable Iron Industry Co and Somboon Advance Technology Co. He said, however, that the local auto-parts industry was still far from recovery. The main reason was that local vehicle production, while improving rapidly, was still far behind the levels seen in the boom years. The current annual output of all vehicles including motorcycles is two million units, compared with pre-crisis levels of five million. Just as vehicle producers have had to seek more export markets to offset slow local sales, auto parts producers must also look abroad, Mr Yongkiat said. The only alternatives they face are to cut production or liquidate. "The industry will need at least another three years before a recovery will take place" he said. The family-owned Somboon Group was founded 40 years ago by Somboon Kiatphanich. In addition to the leaf springs that were its mainstay for the first 30 years of operations, the group now produces more than 100 types of auto parts. Substantial investment has gone into developing the company's plant in Samut Prakan over the past 10 years. After it acquired technology from Mitsubishi Steel Manufacturing, Asahitech, Gohsyu and Ibara Sieki, the company's auto parts began to gain increasing recognition from both American and Japanese automakers. "The quality and standards of our parts are still accepted despite the fact that the car companies are now able to turn to overseas suppliers after the long-standing local- content regulations were abolished at the start of this year," Mr Yongkiat said. (Bangkok Post 15-April-2000) THAI GYPSUM PRODUCT PLC: Court discharges rehab plan ---------------------------------------------------- Krisada Kampanatsanyakorn, Plan Administrator, reported to the Stock Exchange of Thailand that as the Civil Court approved the rehabilitation plan of Thai Gypsum Product Public Company Limited on 19th November 1999 and the Company performed in compliance with the plan through all significant performance. Consequently, the company submitted a petition in order to discharge the plan to the Central Bankruptcy Court on 3rd March 2000. Finally, the Court has made an order in connection with the discharge of Rehabilitation Plan of Thai Gypsum Products Public Company Limited on 10th April 2000. (Stock Exchange of Thailand 11-April-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. 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