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/raid1/www/Hosts/bankrupt/TCRAP_Public/000727.MBX T R O U B L E D C O M P A N Y R E P O R T E R A S I A P A C I F I C Thursday, July 27, 2000, Vol. 3, No. 145 Headlines * A U S T R A L I A * CINEMA PLUS : Curtain comes down LIBERTYONE: Last of founders departs * C H I N A & H O N G K O N G * HAPPY PACIFIC LTD: Facing winding up petition JIANGXI COPPER CO: Province wrests away management * I N D O N E S I A * SALIM GROUP : Gov't warned against annulling debt deals * J A P A N * DAICEL CHEMICAL INDUS: Fine to cause extra midterm loss KANSAI ELECTRIC POWER: To close ailing PHS affiliate NAGASAKIYA CO.: To fire 300 workers, shut 15 stores NIHON SANGYO: Near bankrupt NIPPON CREDIT BANK: FRC to delay sale to Softbank group SONY CORP: Plans bond issue to fund produx, pay debt * K O R E A * DAEWOO GROUP: Foreign creditors sell unsec.debt at 60% DONG-AH CONST: Ex-Dong-Ah head gets suspended jail term HYUNDAI ELECTRONICS: Entangled in lawsuit HYUNDAI ENG'G & CONST: To seek 2.2T won to repay debt HYUNDAI ENG'G & CONST: To swap Iraqi receivable for cash HYUNDAI HEAVY INDUSTRIES: Entangled in lawsuit HYUNDAI GROUP: Facing crisis if loans called in * M A L A Y S I A * MALAYAN BANKING BHD.: Sued for RM20M for defamation MENTIGA CORP.: Creditors push for new management MERCURY INDUS.: Seeks legal remedy vs.winding-up petition * P H I L I P P I N E S * EAST ASIA CAPITAL CORP.: Has explaining to do re capital NATIONAL STEEL CORP.: Receiver says rehab hinges on partner NATIONAL STEEL CORP.: Debt-to-equity scheme opposed PHILIPPINE NAT.BANK: Gov't likely to reject Allied merger REYNOLDS PHILS.: PSE prober to summon officials,brokers REYNOLDS (PHILS.): Names 8 entities in price-rigging issue REYNOLDS (PHILS.): Foreign firm keen in buying stake * S I N G A P O R E * SOGO (Singapore): Unredeemed vouchers have E&Y counting * T H A I L A N D * INT'L ENGINEERING CORP: Close to bt1.7B debt-rehab deal KRUNG THAI BANK: Posts 864.1 million baht loss NATIONAL FINANCE PCL: Reports Q2 net losses ================= A U S T R A L I A ================= CINEMA PLUS : Curtain comes down -------------------------------- Imax cinema operator Cinema Plus, whose $1 shares listed in October 1996, is heading for liquidation, with shareholders facing a return of between zero and 4.6› per share. Confirmation that MTM Entertainment Trust (MME) has entered into an agreement with US group Imax Corporation to operate the trust's four theatres has sounded the death knell for the company, which was relying on continuing as operator of the cinemas to stay afloat. Already under administration with reported debts of about $150 million, and with its shares suspended from trade since May 19, the company was hit by the news yesterday that its chances of continuing as operator of the Imax Cinema chain are nil. The administrator, Ferrier Hodgson, had been negotiating with MME for Cinema Plus to continue as operator but paying a reduced rent. It is now understood to have issued a notice to creditors, recommending the company be liquidated. Ferrier Hodgson was unavailable for comment yesterday, but a creditors' meeting is due on Monday. MTM Funds Management, which manages MME, has consistently said it will not compromise MME unit holders just to aid the survival of Cinema Plus. Although reinstalling Cinema Plus was an option, one that would avoid any major disruption to operations, MME has been investigating the possibilities of installing a rival cinema operator to manage the Imax cinemas, using the equipment leased by Imax. Clearly, it has also been talking to Imax itself, which is an operator in its own right as well as providing the films and the projection equipment. MTM chief executive Mr Andrew Bennett said the deal with Imax was the best result available for MME unit holders. "Imax has always shown a willingness to continue with the Imax screens down in Australia and it is a good result for both of us," he said. The deal struck by MME is for 20 years, made up of a seven- year initial term and options of seven and six years, to operate cinemas in Sydney, Melbourne, Brisbane and Adelaide. The lease covers the cinemas, concession areas, merchandising stores and signage in Sydney, Melbourne, Brisbane and Adelaide and the Melbourne and Sydney cafes. The Brisbane and Adelaide cafes will be leased by MME to third parties. Rent will be paid to MME in a tiered structure. Primary rent will be the lesser of 7 per cent of ticket sales or 50 per cent of net cinema revenue. Imax is entitled to the next 7 per cent and MME will get the first $2 million after net revenue exceeds the primary rent and Imax's 7 per cent royalty. The next $1.75 million goes to Imax, and any excess is split 50:50 between the pair. Mr Bennett said primary and secondary rent (the 7 per cent of ticket sales plus $2 million) is about 60 per cent of the rentals paid by Cinema Plus. He said the rent structure meant MME was leveraged towards any upside in performance while protecting the rental downside. If revenue at the cinemas rises about 35 per cent, which would put them in a similar trading position to 12 months ago, the rental income for MME would be the same as it received from Cinema Plus. (Australian Financial Review 26-July-2000) LIBERTYONE: Last of founders departs ------------------------------------ Mr Graham Bristow, the chief executive of LibertyOne, has left the company he founded, his exit marking a shift in focus for the embattled Internet media company. In a statement last night LibertyOne said Mr Bristow had left the board and would resign as managing director. Acting chief Ms Marcelle Anderson would become the new chief executive, it said. Mr Bristow, who is LibertyOne's largest shareholder with a 12.8 per cent interest, which is in escrow, was unavailable for comment. He has been on extended leave from the company since late June and today flies out to continue his holiday overseas. Mr Bristow is the last of LibertyOne's three founders to leave the company. The other two, Mr Sean Neylon and Mr Jackie Au Yeung, exited the company last year and are believed to have sold a large portion of their stock. It is thought Mr Bristow may now become more involved in his private investment group, Meridian Pacific Capital. He has also shown an interest in property development. LibertyOne chairman Mr Nick Whitlam said Mr Bristow's departure was a "completely mutual" decision. "When I came on as chairman late last year, Graham resumed the chief executive position with great reluctance," Mr Whitlam said. "His skill set is not to manage the day-to- day running of a business but it was important, to settle things, that he take on those responsibilities. Also the market ... was saying it was best if Graham stood down. "He's always said he'll do what's in the best interests of the company, and we've waxed and waned about whether it's a good idea or not. But in the end he was of the view - we all were - that it was best." Since hitting a high of $2.70 last October, LibertyOne shares have plummeted, sinking to 20c late last month. Yesterday they closed down 1c at 28c. Ms Anderson, who was brought to the company by Mr Whitlam, said it was never Mr Bristow's intention to remain as chief executive. "I joined the company in April and from day one he made clear that while he'd taken on the role, he didn't want it," she said. "It wasn't a role he particularly enjoyed. He's an entrepreneur, not a manager." Ms Anderson said LibertyOne, whose four main businesses are Zivo, Monet, Ubid and Persona, would now enter a phase of consolidation and restrained growth with the focus squarely on "business plans and their viability." "We're going to move at a much more measured pace," she said. "Business planning has to be far more rigorous and our systems stricter. We have to demonstrate to the market our businesses are solid, and only then can we give the shares value." Moving into offshore markets, such as Asia, would be done at a slower pace, while the US, including a listing on Nasdaq, was completely "off the agenda." While LibertyOne has still received no formal offer from CyberSentry, yesterday's statement also indicated that any takeover by the US software group would not meet with the board's support. Last week LibertyOne confirmed it had received a fax from CyberSentry that set out acquisition plans, and yesterday the US group's local lawyers, Blake Dawson Waldron, signalled a bidder's statement was on its way. "We cannot discern any material commercial synergies or regulatory advantages for LibertyOne shareholders in the takeover," Mr Whitlam said in a letter to CyberSentry chief Mr Frank Kristan, a one-time acquaintance of Mr Bristow. (Sydney Morning Herald 26-July-2000) ============================== C H I N A & H O N G K O N G ============================== HAPPY PACIFIC LTD: Facing winding up petition --------------------------------------------- The High Court of Hong Kong SAR, Court of First Instance, has scheduled a hearing on September 6 on the petition of Chan Ka Kit for the winding up of Happy Pacific Limited. A notice of legal appearance must be filed on or before September 5. JIANGXI COPPER CO: Province wrests away management -------------------------------------------------- H share Jiangxi Copper has announced that unlisted parent Jiangxi Copper Co is to be managed by the Jiangxi provincial government, replacing China Copper Lead Zinc Corp, one of the three state firms created last August in a shake-up of the metal industry. The news marks a move toward a restructuring of the country's loss-making non-ferrous metal industry. Jiangxi Copper Co, the mainland's largest copper producer, holds a 52.41 per cent stake in Jiangxi Copper. The decision on the management change was made by the State Council in Beijing, the company said. Jiangxi Copper said the management change might result in an obligation by the Jiangxi provincial government to make a general offer for the company. However, the company expects it to apply for a waiver from the Securities and Futures Commission. Analysts said the move could pave the way for more decentralisation of the industry. Du Xinmin, executive director of Jiangxi Copper, said the decentralisation should be an incentive to regional enterprises to make more efficient use of mineral resources. Mr Du said all the parties had yet to work out a method of transferring power. "The ownership [in companies] is not clearly defined . . . and there are several possibilities . . . the ownership could be taken by [a province-level] state asset management department and the management right transferred to the parent company from the provincial government," he said. The management of many metal producers was originally in the hands of regional governments until the 1980s when the State Council centralised matters in a bid to create more efficient resource use only to find that precluding regional or enterprise management involvement caused many problems within the system. The establishment of the three state firms last year resulted in little progress, with analysts saying they are expected to be dissolved because the problems still could not be solved. Last month, industry officials said the structure of the three holding companies would be revamped, which could mean a restructuring of the mainland's non-ferrous metal industries for the second time in less than a year. The move could break up the three holding companies and shift some control back to the provinces. Analysts have speculated that plans by China Aluminium Co (Chalco) - one of the holding companies - to shut down small smelters could run into opposition from local governments, which would have to deal with the resulting unemployment. Chalco controls half the country's smelters and all imports of alumina. Smelters outside Chalco's control complained about having to pay Chalco prices for alumina. Analysts believed that in about two months, the State Council would announce a restructuring of Chalco - set up last August and which recently moved into a new 70 million yuan (about HK$65 million) office. (South China Morning Post 26-July-2000) ================= I N D O N E S I A ================= SALIM GROUP : Gov't warned against annulling debt deals ------------------------------------------------------- President Abdurrahman Wahid's economic advisors warned the government on Tuesday against arbitrarily annulling the debt-settlement agreements already concluded by indebted bankers and the Indonesian Bank Restructuring Agency (IBRA) in late 1998. Sofyan Wanandi, Chairman of the National Business Development Council, and Sri Mulyani Indrawati, secretary of the National Economic Council, cautioned that the government should have a strong legal basis for changing the debt-settlement deals. "Whatever the government does should be entirely within proper legal guidelines to ensure validity," Sofyan told reporters in commenting on Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie's remarks on Monday. Kwik said the government was reviewing the Master of Settlement and Acquisition Agreement (MSAA) between several former bank owners and IBRA whereby the debtors surrendered their assets to repay their debts to the government. Among the major indebted bankers signing the agreements were the Salim group, Mohammad 'Bob' Hasan, Usman Admadjaja, Syamsul Nursalim and Ibrahim Risyad. Kwik argued that if the MSAAs were not canceled or reviewed, they would incur huge losses for the government and taxpayers as the value of the ceded assets turned out to be far below the outstanding indebtedness. Sofyan, however, argued that the MSAAs were concluded after vigorous negotiations where both the debtors and government were assisted by the country's best lawyers and the agreements were endorsed by the International Monetary Fund. "If the government can easily change or cancel any agreement long after it was signed, where then is our legal certainty," he added. He argued that asset values could fluctuate sharply or fall steeply, especially amid the economic crisis the country is facing, but this by itself cannot be a legitimate reason for canceling a legitimate agreement. "Businesspeople badly need law certainty and stable conditions in order to fuel economic recovery," Sofyan said, adding that any controversial plan as cited by Kwik could further dampen investor interest. Sri Mulyani said there was still room for renegotiation between the government and the debtors to iron out the best solution to the problem. "As long as both sides renegotiate in good faith, the difference of views regarding the debt-settlement agreements could still be worked out," she added. (Jakarta Post 26-July-2000) ========= J A P A N ========= DAICEL CHEMICAL INDUS: Fine to cause extra midterm loss ------------------------------------------------------- Daicel Chemical Industries Ltd. said Wednesday it will post an extraordinary loss for the first six months of fiscal 2000, stemming from a $53 million fine it has agreed to pay in a price-fixing case in the United States. Daicel will make up for the loss by selling part of its assets, and "has so far not changed its earnings outlook for the fiscal first-half period ending Sept. 30, a Daicel spokesman said.( Kyoda News On Line 26-July-2000) KANSAI ELECTRIC POWER: To close ailing PHS affiliate ---------------------------------------------------- Kansai Electric Power Co.said Monday it will transfer Astel Kansai Corp.'s personal handy phone system business to its wholly owned unit, K-Opticom Corp., on Nov. 1 and wind up the troubled PHS affiliate. Kansai Electric Power will waive its loans totaling 13 billion yen to Astel Kansai. The Osaka-based power supplier will also provide the troubled firm with up to 32.5 billion yen to help wipe out its excess liabilities. In the business year to March 2001, the series of supportive measures for Astel Kansai will reduce Kansai Electric Power's parent-only net profit by 22 billion yen compared with the previous projection announced in May. Meanwhile, its consolidated net profit will increase 20 billion yen from the previous estimate because of a tax-related factor over the liquidation. (West Clip, Jiji Press English News Service 24-July-2000) NAGASAKIYA CO.: To fire 300 workers, shut 15 stores --------------------------------------------------- The collapsed Nagasakiya Co. supermarket chain operator will fire 300 workers and close 15 stores before next February to rebuild itself. (Mainichi Daily News 26-July- 2000) NIHON SANGYO: Near bankrupt --------------------------- Nihon Sangyo, an affiliate company founded by the late hotelier Hideki Yokoi, is almost bankrupt, according to Teikoku Databank Ltd., a private credit research company. Banks have suspended business with Nihon Sangyo, whose liabilities total 78 billion yen. Nihon manages pachinko parlors and real estate lease businesses. According to Teikoku Databank, the company was founded in 1956 by Hideki Yokoi, the late former president of Hotel New Japan, who was found liable for negligence in a 1982 hotel fired that killed 33 people. The company currently is being run by Yokoi's second son. Company sales in 1992 amounted to about 10.5 billion yen, but by 1997, they had decreased to some 6 billion yen. Excessive debt has hampered the company's management and company-owned real estate has been seized by the courts. NIPPON CREDIT BANK: FRC to delay sale to Softbank group ------------------------------------------------------- The Financial Reconstruction Commission (FRC) and a consortium led by Softbank Corp. have agreed to delay the sale of the nationalized Nippon Credit Bank (NCB) by about one month, FRC Chairman Kimitaka Kuze said Wednesday. The delay comes amid a public outcry over a controversial clause contained in the sales contract between the FRC and the consortium, which includes Orix Corp. and Tokio Marine & Fire Insurance Co. (Kyodo News Online 26-July-2000) SONY CORP: Plans bond issue to fund produx, pay debt ---------------------------------------------------- Sony Corp., one of the 15 worst-performing stocks on the Nikkei 225 index this year, is hoping its debt gets a kinder reception from investors. The world's No. 2 electronics maker plans to tap the domestic bond market for as much as 300 billion yen ($2.76 billion) to ramp up production of chips for its PlayStation 2 game console to keep pace with demand and repay debt. "Sony has a high name value, and a decent credit rating, so anything they issue would tend to make for a good buy," said Yousuke Miyake, senior portfolio manager at Nissay Asset Management Co. With the Bank of Japan expected to soon raise interest rates from the near-zero level of the past 17 months, Sony could lock in low rates and retire some more expensive debt if it acted now. "A rate hike by the BOJ would help widen corporate bond spreads, which are looking very tight right now," said Tim Kerans, a bond analyst at Barclays Capital. Some analysts say that even if the central bank raises rates, Sony's name and credit rating are strong enough to ensure that investors snap up any bonds it sells. If the bank raises rates, corporate debt may underperform government bonds though Sony's bonds may pay a big enough coupon to offset that. The company needs to raise funds to expand digital broadcasting, mobile equipment production and microchip production and offset start-up costs for the PlayStation 2. Sony's stock is down 32 percent in 2000 compared with the 13 percent slide by both the Nikkei and the Topix index of all shares on the Tokyo Stock Exchange first section. The shares closed Tuesday at 10,450 yen, down 40 yen. By contrast, Sony's No. 7 warrant bonds, maturing Aug. 23, 2005, have outpaced government debt of similar maturity. This month, the yield on the bonds narrowed to within 28 basis points, or 0.28 percentage point, of five-year Japanese government bonds, the slimmest spread since they were issued. The yield has dropped 23 basis points since mid-April and was recently at 1.36 percent. Spreads may widen after a rate increase as corporations face tighter credit conditions, forcing them to pay a higher premium on their bonds over government debt, Mr. Kerans said. Other analysts, though, say they expect Sony bonds to sell well. "Sony doesn't issue a lot of bonds, so investors looking to diversify their bond portfolios will be attracted to this issue," said Xinyi Lu, chief strategist at Tokai Bank Ltd. "There aren't many issuers like Sony out there." A bond issued by Sony should perform relatively well compared to other corporate bonds due to its high credit rating and name value, Mr. Lu said. That means even if the central bank raises rates, Sony debt has a good chance of giving investors a positive return. Sony has not said what maturity or type of debt it may sell. Japan Rating & Investment Information Inc. rates Sony bonds AA-plus. Moody's Investors Service Inc. rates them Aa3. Sony sold $1.5 billion in five-year global bonds in March 1998 through Goldman Sachs Group Inc., J.P. Morgan & Co. and Merrill Lynch & Co. It sold 80 billion yen in eight- year domestic straight bonds in September 1993 and 300 billion yen in domestic convertible bonds in February 1990 through Nomura Securities Co. The company this week is expected to report a loss for the second quarter as it takes a one-time charge of as much as $950 million to write off marketing costs for its entertainment business. (Herald International Tribune, Bloomberg 26-July-2000) ========= K O R E A ========= DAEWOO GROUP: Foreign creditors sell unsec.debt at 60% ------------------------------------------------------ Foreign creditors of the Daewoo Group have agreed to sell nearly all unsecured debt at a 60 percent discount, clearing a major obstacle to the restructuring of the insolvent conglomerate, officials said Tuesday. Daewoo's restructuring committee said cash buyout applications from foreign creditors amounted to 3.92 billion dollars, or 92 percent of 4.27 billion dollars of foreign debt eligible for the sale to a state-run company. The buyout applications met a July 21 deadline, committee head Oh Ho-Keun said in a statement. "With the successful completion of cash buyout applications, the restructrucing of Daewoo will be speeded up," he said, adding that the applications surpassed the minimum amount required for Daewoo's debt restructuring. State-run Korea Asset Management Corp. will purchase the unsecured foreign debt at 39-40 percent of face value over the next eight weeks, he said. Foreign creditors applied to sell 3.09 billion dollars of unsecured debt owed by Daewoo Corp, 92.5 million dollars by Daewoo Motor, 411.3 million dollars by Daewoo Electronics, 288.6 million dollars by Daewoo Heavy Industries Co. Ltd, and 35.5 million dollars by Daewoo Telecom. They also agreed to sell 83.30 million dollars of secured loans to the government, bringing to four billion dollars the total secured and unsecured debt they applied to sell. The committee promised to accept more buyout applications from foreign creditors until August 4. Daewoo was once the country's second largest conglomerate. Since it collapsed in August last year with 80 billion dollars in total debts, the government has put 12 Daewoo companies under a debt workout program. But the program had been delayed by disputes between domestic and foreign creditors over how to write off Daewoo's foreign debt. The two sides reached an agreement in February, which has been approved by more than 90 percent of the group's foreign creditors. Committee officials said the "positive" response from foreign creditors came after Ford Motor Co. was selected last month as the sole bidder for Daewoo Motor, with a non-binding offer of 6.9 billion dollars. The auction of Daewoo Motor was a crucial part of the breakup of the Daewoo Group. Creditors of Daewoo Corp., the group's biggest borrower, agreed last week to split the company into three entities. They also agreed to swap their loans for equity stakes. (Agence France Presse 25-Jul- 2000) DONG-AH CONST: Ex-Dong-Ah head gets suspended jail term ------------------------------------------------------- Choi Won-suk, 57, former chairman of Dong Ah Construction, was yesterday sentenced to one year in prison with a two- year suspended term for giving 120 million won in bribe to a lawmaker in return for favors. The Seoul District Court handed down the suspended term to Choi, who was found guilty of providing the bribe to ex- lawmaker Paek Nam-chi during 1996-97, who served as chairman of the construction-transportation committee of the National Assembly. The court also ordered Dong Ah to pay 10 million won in fines for violating the Securities Transaction Act. The prosecution had earlier summarily indicted Choi with the imposition of 20 million won. But his case was brought to court February this year as the prosecution attacked for being too lenient to the business tycoon. (The Korea Times 25-July-2000) HYUNDAI ELECTRONICS: Entangled in lawsuit HYUNDAI HEAVY INDUSTRIES: Entangled in lawsuit ---------------------------------------------- In yet another humiliation of Korea's largest -- Hyundai Business Group, two of the core sister-subsidiaries became entangled in a lawsuit over loan repayment. Hyundai Heavy Industries (HHI) announced Tuesday it plans to file a lawsuit in a civil court against another subsidiary, Hyundai Electronics, to return a loan repayment, which HHI claimed to have paid in place of Hyundai Electronics. HHI said Tuesday that Hyundai Electronics borrowed a total of US$220 million loan from a Canada-based CIBC on the collateral of shares of Hyundai Investment Trust (HITC). HHI went on to say that when the loan matured on July 24, Hyundai Electronics demanded that HHI pay off the loan as HHI extended a repayment guarantee for the loan. HHI said that it remitted the full amount of the loan Monday. (The Digital Chosun 26-July-2000) HYUNDAI ENG'G & CONST: To seek 2.2T won to repay debt --------------------------------------------------- Hyundai Engineering & Construction Co., Korea's largest contractor, plans to raise as much as 2.24 trillion won ($2 billion) to repay existing debt, of which 1.1 trillion won is due in the latter half of this year, the Korea Economic Daily reported citing the company. The plan includes the sale of buildings and real estate worth about 482.8 billion won and an offer of asset-backed securities worth 200 billion won, the paper said. Hyundai is also in negotiations to retrieve about $850 million owed by its Iraq construction project, KED said. Korea Management & Consulting Credit Rating Corp. this week lowered Hyundai Engineering's rating to below investment grade, reflecting concerns about the slow pace of restructuring at the nation's biggest industrial group. (Bloomberg, Korea Economic Daily 26-July-2000) HYUNDAI ENG'G & CONST: To swap Iraqi receivable for cash -------------------------------------------------------- Hyundai Engineering & Construction, a key affiliate of Hyundai Group that is the center of speculation for its alleged grave cash flow situation, has agreed in principle to sell European banks $850 million in payment it has failed to receive from Iraq for construction work, Hyundai officials said yesterday. The bonds will be sold at a discount and the group is expected to retrieve 80-90 percent of the bonds, they said, relieving a major choke on its liquidity situation. "The agreement was made last month," a Hyundai official said. "The discount rate is fixed at 10-20 percent so at least 80 percent of the outstanding sum will likely be retrieved." The officials said that the retrieved portion will be paid in installments with the first to be received by August at the earliest. They said that at present, the two sides are fine-tuning the discount rates so that everything may be settled in a couple of months. The Hyundai Construction officials expect that with the lifting of an embargo on Iraq coming closer to reality, the discount rates would be smaller, raising prospects of retrieving a bigger portion of the outstanding sum. They also said that Hyundai Construction has been in contact with Iraqi officials through its branch office in Baghdad and as a result received an affirmative response as to the earliest possible settlement of the issue. Iraqis are in a position to put a priority on the settlement of overdue payment as soon as they can gain foreign currency from oil exports, once the U.N. sanctions are lifted. Hyundai officials said that they received a written statement about Iraq's intention to that effect. Hyundai also won favorable rulings from U.S. and British courts. (The Korea Times 24-July-2000) HYUNDAI GROUP: Facing crisis if loans called in ----------------------------------------------- South Korea's largest conglomerate, the Hyundai group, could face a debt crisis if financial institutions continue to call in loans at the current rate, the group's main creditor bank said yesterday. "It will take time for Hyundai to carry out self-rescue efforts, including the sale of real estate and securities," Korea Exchange Bank (KEB) vice president Lee Yun-Soo told journalists. "Second-tier financial institutions should give Hyundai more time instead of collecting loans en masse. I hope they should behave reasonably as it is true that Hyundai would face difficulties if they call on loans to Hyundai all at once." On Monday alone, financial institutions called on loans worth 130 billion won (US$116 million) from the group's construction arm, Hyundai Engineering and Construction. The Hyundai group had to hurriedly raise 100 billion won and the KEB alone had to extend the maturity of some 16 billion won worth of credit including loans and commercial paper. The KEB urged Hyundai to speed up corporate restructuring including the spin-offs of its non-core units and the settlement of its troubled financial trust company, Lee said. However, he stressed that Hyundai Engineering and Construction would have little problem meeting some 100 billion won of debt which will mature by the end of this month. The Hyundai group informed the KEB of its plan to raise another 880 billion won in cash through sell-offs of real estate and other assets on top of sales of 600 billion won already announced, he said. Finance and Economy Minister Lee Hun-Jai added his voice to efforts to ease rekindled market anxieties over Hyundai. "There are no signs that Hyundai group's cashflow condition is becoming worse, rather it is improving," he said. He dismissed the possibility of Hyundai Engineering and Construction being placed under a "workout" rescue program by its creditor banks or court receivership. The call in of Hyundai loans came amid increasing concerns over tight liquidity faced by Hyundai and the slow pace of restructuring of the conglomerate. A senior official of an investment trust company, who asked not to be named, said the appeal from the KEB not to call in loans to Hyundai would fall on deaf ears. "If somebody shouts 'fire' in a cinema, you don't bother to check whether there is a real fire there but rush to get to an exit first," he said. "Hyundai and the KEB must come up with concrete measures to improve the situation. Otherwise, the situation will get worse." South Korea's major ratings agency Korea Management and Credit Ratings on Monday downgraded Hyundai Engineering and Construction and Hyundai's Korea Industrial Development to a speculative level and also lowered the ratings of other Hyundai units. Both Hyundai units were rated BB-plus, down one notch from their previous level of BBB-minus. Other Hyundai units were also downgraded but continued to hold investment grade ratings. Parent Hyundai was downgraded to BBB-plus from A- minus. The group rejected the ratings downgrades as unfair. "We have absolutely no problems with cash flow," Hyundai Engineering and Construction president Kim Yun-Kyu said. (Business Day Thailand, AFP 26-July-2000) =============== M A L A Y S I A =============== MALAYAN BANKING BHD.: Sued for RM20M for defamation --------------------------------------------------- Amalan Perabot (M) Sdn Bhd today filed a RM20 million defamation suit against Malayan Banking Berhad for allegedly wrongfully dishonouring a cheque although there was sufficient funds in the account. Amalan Perabot director Leanny H'ng filed the suit at the High Court (Civil Division) Registry in Wisma Denmark through the legal firm Messrs K. Balaguru. In its statement of claim, Amalan Perabot said Maybank allegedly dishonoured a cheque for RM700 it issued to its supplier, WTT Trading, in March last year. WTT Trading had deposited the cheque in RHB Bank Bhd but subsequently returned the cheque to Amalan Perabot. The cheque was stamped twice with "Account Closed." Amalan Perabot is claiming that Malayan Banking had falsely and maliciously dishonoured the cheque. It is claiming loss of credibility and trading reputation as WTT Trading subsequently refused to accept cheques from it and asked to be paid in cash. It is further claiming that: --The words "Account Closed" meant that the company had no money in its account at the bank, that it could not be trusted, could not be given credit and was a bankrupt company; --WTT Trading informed its (Amalan Perabot) employees that the cheque for RM700 was not endorsed by the bank because the account was closed and this had caused panic amongst the employees; and, --By stamping the words "Account Closed" on the cheque, the bank was effectively publishing to all those who saw the cheque that the company was dishonest and could be charged with cheating for taking goods and paying with a cheque from a closed account. Amalan Perabot is also seeking an apology, interest and costs. (New Straits Times 25-July-2000) MENTIGA CORP.: Creditors push for new management ------------------------------------------------ A change in ownership, including a management buyout, is on the cards for debt-laden Mentiga Corporation Bhd, which is heavily into palm oil, property and timber. A major "push" factor is said to be pressure from the creditors for new faces to run the company, which owes about RM70 million to a few local banks. The aim of the exercise, according to sources, is to clip the wings of current executive chairman and chief executive officer Datuk Ghazali Mohd Khalid so that he has less say in how the company is to be turned around. Amanah Saham Pahang Bhd holds more than 50 per cent of the Pahang-based company while Ghazali owns about nine per cent. The company's paid-up share capital currently stands at RM37.5 million. Should there be new management, one source says new shareholders will have to buy the shares from Amanah Saham Pahang. Some management staff of the company are believed to have submitted the MBO proposal to the Pahang Government. Negotiations between the two sides are ongoing, according to sources. Another source believes Amanah Saham Pahang is looking favourably at the proposal because creditors are frustrated over the current management's efforts in improving the company's financial situation. It is believed that under the proposed MBO, the Pahang Government is being asked to inject an asset - forest land in Lesong, Sungai Lembing in southern Pahang, which will be cultivated with oil palm. The forest clearing for the project will ensure sufficient supply of logs for the operations of the company's plywood factory which is facing a supply crunch in logs. The factory gets its supply of logs from the company's 55,200-ha timber concession in Lesung. Mentiga has obtained the rights from the State Government to log 1,000ha of the concession a year. However, the logs produced by the concession are insufficient for its factory. Analysts feel the company needs to have new management if it wants to continue to survive. "A change in management is needed if the company is to avoid being placed under Section 176 of the Companies Act," an analyst said. The section provides for court protection from bankruptcy while a company works out a plan agreeable to creditors to repay its debts. Mentiga is currently said to be unable to service the interest - RM7.6 million - on its loans. Analysts agree that it needs new management to negotiate with the bankers. "The creditors do not want to negotiate with the current management ... they want new faces," one analyst said. "Under normal circumstances, when a company is in trouble, the creditors want to see changes in the management." One analyst suggests that the new management should focus on the company's original core business - timber-related activities. "They should concentrate on what they know best if they want to make a profit," he said. Mentiga was set up in late 1970 with timber-related activities as its core business. It later diversified into palm oil and property businesses. The 99.9 per cent Bumiputera-owned company was listed on the Main Board of the Kuala Lumpur Stock Exchange in 1991. Mentiga has posted pre-tax losses of RM37.013 million and RM19.407 million for 1999 and 1998 respectively. The company plunged into the red for the first time in 1996, posting a pre-tax loss of RM3.103 million. It currently has about 1,000 employees, 500 of whom are contract staff. Mentiga's primary source of revenue is its Lesung timber concession which has generated revenue totalling about RM54 million since 1994. Another analyst believes that Mentiga's earnings gradually shrunk and the company finally posted losses when it deviated from the timber-related business. "Perhaps, the company would have been financially better off if it had concentrated on its core expertise instead of venturing into something new such as property," he said. He said the company's financial difficulties could also be due to its acquisition of a 25,000-ha oil palm plantation in Pulau Belitung in Sumatera, Indonesia, in 1994. Of that, only 9,500ha have been planted with oil palm following its difficulties in getting financial assistance. Mentiga is in the process of disposing the oil palm plantation in Pulau Belitung. On Friday, Mentiga ended trading at RM1.68 per share. (The New Straits Times 24-July-2000) MERCURY INDUS.: Seeks legal remedy vs.winding-up petition --------------------------------------------------------- Mercury Industries Bhd plans to seek legal remedy to oppose a winding-up petition served on it, as the company views the claims by the petitioners as baseless and wholly without merit since the company is on sound financial footing. Mercury was served with a winding-up petition as it has allegedly failed to pay RM170,367.14 in legal charges for the services of lawyers Kumar, Jaspal, Quah and Aishah, a claim that Mercury is disputing in its entirety. It said in a statement to the Kuala Lumpur Stock Exchange that the company has not previously received notice of any judgement obtained by the petitioner nor has the company been involved in any litigation in respect of the petitioners claim. Mercury, which manufactures and distributes paints and related products for the automotive and construction industries, pointed out that it is in a healthy financial position, solvent and more than able to pay off its debts. For the financial year ended December 31 1999, its shareholders' funds stand at about RM38.6 million and cash deposits totalled RM3.5 million. Thus, it said, the company will seek to exhaust all remedies to oppose the petition, defeating the petitioner's claim and protecting the interest and reputation of the company, its creditors and shareholders. It added that the petition will not have any operational nor financial impact on the group and the company does not expect any losses flowing from the petition. The hearing for the petition is fixed for August 17. (Business Times 24-July- 2000) ===================== P H I L I P P I N E S ===================== EAST ASIA CAPITAL CORP.: Has explaining to do re capital -------------------------------------------------------- The corporate regulator has threatened to impose graver sanctions against troubled investment firm East Asia Capital Corp. (AEA) for failure to comply with the minimum paid-up capital requirement of 300 million Philippine pesos (PhP) (US$6.71 million at PhP44.692:US$1). An audit conducted by the Securities and Exchange Commission (SEC)'s brokers and exchanges department (BED) showed that as of May 31 this year, AEA has not complied with the capital provision of Presidential Decree (PD) 129. BED said the investment house should infuse additional capital, amounting to over PhP172.33 million ($3.85 million) or face appropriate sanctions as provided by law. The Commission earlier gave investment houses until the end of May to comply with the minimum paid-in capital requirement, following requests made by over 16 investment houses. In an earlier memorandum, the commission's capital market division required the investment houses to submit an undertaking stating that "failure to comply with the minimum paid-in capital requirement within the extended period shall cause outright revocation of their investment house licenses." The SEC's capital requirement was first imposed in March 1998 following the liberalization of the investment houses industry. The 300-million-peso paid-in capital requirement was imposed to promote and ensure stability of the capital market and competitiveness of investment houses in the country. The Commission's audit findings also showed that AEA violated a Monetary Board Resolution which requires that at least 25% of the firm's total income be derived from underwriting and other fee-based activities. According to the BED's report, AEA's fee based income for the month ending May 31, 2000 amounted to PhP1.37 million or 20% of its gross income of PhP6.82 billion. BED found AEA's net worth of PhP277.76 million, which is more than the required 10% of the risk assets of PhP79.82 million, in compliance with the capital adequacy ratios prescribed by the Bangko Sentral for investment houses. (Business World 26-July-2000) NATIONAL STEEL CORP.: Receiver says rehab hinges on partner ----------------------------------------------------------- The receivership committee overseeing the operations of National Steel Corp. (NSC) reiterated that the resumption of operations of the cash-strapped steel firm is hinged on the entry of a strategic partner willing to cough out the much-needed funds to finance NSC's working capital requirements and pay off debts. In a letter to the SEC, the interim receivership committee headed by former Petron Corp. chairman Monico Jacob said the "successful implementation of the proposed rehabilitation plan is premised on the entry of a strategic partner/investor for NSC, preferably a slab producer." The letter was in response to the concerns raised by the Credit Agricole Indosuez regarding the rehabilitation for NSC. Marc Meuleau, senior country officer of Credit Agricole said the implementation of the proposed rehabilitation plan remains very much hinged on the entry of a strategic investor for NSC. Meuleau also noted that aside from the importance of supportive governmental policies in terms of important tariff duties and anti-dumping, there does not seem to be incentives for prospective parties to pursue their investments further. Dutch firm Ispat International NV is the only company that has offered to acquire the NSC and help pay down the steel firm's debts since the other potential investors were interested only in running certain facilities of NSC over a certain period of time. He said that the application of Ispat is currently being studied by NSC's interim receiver which was mandated by the SEC to evaluate the best way the financially-troubled steel firm can be rehabilitated. Other groups earlier reported to be interested to vie for the control of NSC include the Novolipetsk Iron and Steel Corp. of Russia, Duferco SA, Grupo Jacinto, and Allengoal, among others. Burdened with over P16 billion in debts, NSC shut down its operations in Iligan City last November, driving 2,000 workers out of work. In July 1999, creditor-banks of NSC shot down a rehabilitation plan offered by Ispat and threatened to file foreclosure proceedings against the steel firm's assets unless a better plan was made or another strategic partner was found. NSC's financial troubles started when the promised capital infusion of Malaysian investors such as the Wing Tiek Group and Hottick in order to fund the steel firm's expansion, failed to materialize. Lacking fresh funds, NSC was forced to borrow from banks to continue its operations which have been badly hit by the entry of cheap steel imports from South Korea and Russia. Based on the rehabilitation plan filed with the SEC, P9 billion of the steel firm's P16.5 billion in debts should be restructured into 10-year amortizing bonds and the balance converted into equity. The plan also called for the entry of a strategic partner, preferably a slab producer that would infuse additional capital of $600 million to $1 billion into NSC as well as the write-down of non-performing assets and the funding of capital expenditures through long-term debts. NSC also intends to dispose big-ticket, drag assets not directly related to its core business, mainly real estate, to improve liquidity and profitability ratios in the short- term. Proceeds from the sale of these assets will be used to satisfy payables to retired and retrenched employees and government taxes. As of Dec. 31, 1999, total assets of NSC stood at P28 billion, P24.6 billion of which comprises property, plant and equipment. Total liabilities, on the other hand amounted to P17 billion including bank debts of P13.2 billion and trade payables of P500 million and accrued expenses for retirement/separation pay of P600 million. The company's resulting networth is P11 billion. Meuleau also objected to the proposal, pricing at six percent per annum the US-denominated portion of the restructured long-term debts of NSC, saying it is below Credit Agricole's present cost of funds. "We are therefore not comfortable over the proposed coupon rates and would prefer to see coupon rates based on a variable index," he said. (Manila Times 25-July-2000) NATIONAL STEEL CORP.: Debt-to-equity scheme opposed --------------------------------------------------- French financing institution Credit Agricole Indosuez is opposing the proposed conversion of a portion of National Steel Corp.'s long-term debt into equity, citing legal constraints and foreign exchange risks. Credit Agricole has a P1.68-billion exposure in NSC, which is saddled with over P14 billion in debts. In a letter to the Securities and Exchange Commission (SEC), CAI's Manila offshore branch senior country manager Marc Meuleau said the debt-to-equity proposal, as raised by NSC's interim receivership committee, "is not possible as far as our exposure on NSC is concerned in light of our legal inability to hold on to Philippine peso-denominated securities as per banking license constraints." "Furthermore, such conversion will expose the bank to foreign exchange risk considering that our books are denominated in US dollars," he added. The three-man interim receiver team overseeing the rehabilitation program of the cash-strapped steel firm has recommended the conversion of a P7.5-billion debt owed to banks into equity to make NSC more attractive to strategic investors or partners, preferably slab producers. The SEC-appointed receivers, made up of chairman Monico Jacob and members Guido Alfredo Delgado and Antonio Arizabal, meanwhile, countered that for banks that have legal constraints, the rehabilitation plan provides that other arrangements, such as trustee relationships be pursued. Jacob, a former SEC associate commissioner, said instead of bleeding to pay its heavy P14-billion loan, NSC can convert the debts from its creditor banks to make them majority owners holding as much as P87 percent of the steel firm. He said move would entice interested foreign investors to buy into NSC, instead of putting upfront $100 million to take control of the firm's operations. While he said "nothing is definite yet" on talks with investors that have expressed interest in the firm, most of them have indicated preference on the debt-to-equity conversion scheme. These investors include Russia's Duferco, ispat international of the Netherlands and US based Allengoal. Meulaeu pointed out that the successful implementation of the rehabilitation plan "remains very much hinged on the entry of a strategic partner/investor for NSC." "It has been observed that interested parties have likewise expressed the importance of supportive governmental policies in terms of import tariff duties and anti-dumping laws; otherwise, there does not seem to be much incentives for interested parties to pursue the matter further," Meulaeu added. National Steel Corp., the country's largest producer of semi-finished steel products, has been facing foreclosure due to the poor repayment and escalation of its debts. It has total assets valued at P29.965 billion, the bulk of which are in the form of property plant and equipment in its Iligan City plant. Malaysia's Hottick Investments controls of 82.5 percent of NSC, acquired through the buy-out of fellow Malaysian conglomerate Wing Tiek-Holdings Bhd. in 1997, as the crippling Asian financial crisis took its toll on Wing Tiek's operations. The government through the National Development Co. still holds 12.5 percent of the steel firm with the remaining five percent accounted for by Japanese trading conglomerate Marubeni Corp. (Philippine Star 25- July-2000) PHILIPPINE NAT.BANK: Gov't likely to reject Allied merger --------------------------------------------------------- After a recent bid to successfully wrestle 76% control of Philippine National Bank (PNB), Chinese-Filipino tycoon Lucio Tan wants to revive an earlier plan to merge the country's fourth-largest bank by assets with his Allied Banking Corp. Well-placed sources, however, said major stumbling blocks to Mr. Tan's grand plan are the PNB board itself and the government, which recently sold its 30% stake in the bank. "(A PNB-Allied Bank merger) has long been on Mr. Tan's mind but the board has been advising him against it. As it is, we have enough problems with one (bank)," a top bank executive said, referring to PNB. The Bangko Sentral (Central Bank of the Philippines) also shot down the possibility of a merger between the two banks, citing "operational incompatibility". "They cannot merge at this point," Bangko Sentral Gov. Rafael B. Buenaventura said. "These banks are better off operating separately." He also said there is a pending sequestration issue involving the ownership of a large block of Allied Bank shares that has not yet been resolved by the courts. Mr. Tan holds a "super-majority" position in Allied Bank. He said given the present condition of PNB -- which is undercapitalized, has an above-industry average bad loans ratio, being, and suffered a net loss last year -- its manager should run it separately so as not to "muddle" its finances further. "Why create problems for Allied (Bank) at this point?" he said. "That bank is doing reasonably well, and it doesn't make sense for them to complicate things." He said PNB needs "massive restructuring and capital infusion" to ensure its continued viability and return to profitability. Meanwhile, analysts said Mr. Tan's recent capital-raising activities for PNB will likely pave the way for the successful rehabilitation of the bank. However, the efforts will still not likely be enough to nurse the bank to health, at least in the next two years. Last Friday, PNB stockholders approved the increase in the bank's authorized capital stock to 50 billion Philippine pesos (PhP) (US$1.12 billion at PhP44.529:US$1) from PhP15 billion, a reduction in its par value to PhP60 per share from PhP100, as well the issuance of stock rights and warrants. Orion Squire Capital research head Cilette I. Liboro said the rights offer will bring in an additional PhP10.3- billion capital to the bank, on top of PhP13.92 billion in capital funds PNB already has as of the first quarter. Consequently, the bank's total outstanding shares will increase by 16.6% to 378 million from 206 million after the rights offer, she said. These will likely result in an adjustment in its book value of PhP64.07 per share, higher than the bank's current market price of PhP56.50 apiece. "Despite the improvement in the bank's capital structure, PNB will continue to post poor profitability. We do not see the rehabilitation (making an) impact on earnings until 2002," Ms. Liboro said. PCCI Securities research head Gonzalo Bongolan said the bank's profitability target as well as a reduction in its non-performing loans (NPLs) ratio by 10 percentage points to 25% by year-end are "quite achievable". This is given analysts' consensus the bank may even earn as much as PhP200 million to PhP300 million this year, he added. "The capital call will put the bank on the right track to rehabilitation and competitiveness," Mr. Bongolan said. "But the 36% NPL is no joke," he added. (Business World 25-July-2000) REYNOLDS PHILS.: PSE prober to summon officials,brokers ------------------------------------------------------- The Philippine Stock Exchange's Business Conduct and Ethics Committee (BCEC) has summoned officials of Reynolds Philippines Corp. and a number of brokerage houses to a series of hearings within the next two weeks to wrap up the probe on the suspected illegal trading of Reynolds shares. BCEC sources said yesterday the committee was set to sit down with the 15-member PSE board tomorrow to discuss the probe on the possible violation of trading rules by RPC. The sources said the recommendation, which would be taken up during tomorrow's PSE board meeting, was to suspend the trading of Reynolds shares. However, they said the brokers suspected of having participated in the illegal trade would be given due process. "We'll be calling the brokers and give them proper audience. They have to be heard. They have to be given the opportunity to explain their side," a BCEC member said. "I don't think it's as grave as the BW Resources Corp. price manipulation scandal. It's just that there's a violation of the securities law." The BCEC met on Friday to discuss the ongoing probe on Reynolds. The sources declined to identify the brokers tagged in the illegal trade of Reynolds shares, but said they had been advised of the forthcoming hearings. The PSE has put Reynolds under close scrutiny on suspicion that the company might have resorted to "kiting" and "wash sale" activities to influence the trading of company shares. "Kiting" is a practice that allows temporary funding or bridge financing through advance payment of selling transaction. "Wash sales" are transactions wherein the buyers and sellers are the same. (Philippine Daily Inquirer 25-July-2000) REYNOLDS (PHILS.): Names 8 entities in price-rigging issue ---------------------------------------------------------- At least three companies, four individuals and one brokerage firm were named in the initial report conducted by the Philippine Stock Exchange (PSE) on the alleged price rigging controversy involving aluminum sheet maker Reynolds Philippines Corp. (RPC). BusinessWorld also learned that in the four-page audit report drafted by the PSE's Compliance and Surveillance Group (CSG), the bourse alleged that RPC had a "pre- arranged deal" with some buying or selling brokers from May to June this year. Those identified include Profinda Holdings Corp., BPC Power Corp., RPC Retirement Fund, Francisco Betia, Jerome Cabaral, Jorge Navarra and Fernando Manotok. The report also identified foreign brokerage firm DBP Daiwa Securities Corp. Representatives of the identified entities were not immediately available for comment. The audit report also alleged that RPC initiated "kiting" and "wash sale" activities in the stock market during the said period to influence the movement of its share price. Kiting is a practice which allows the temporary use of funding or bridge financing through advance payment of selling transaction. A wash sale, on the other hand, involves the same buyer and seller in a transaction. Both practices artificially influence the prices of stocks. In a letter to PSE president Ramon T. Garcia, RPC denied its involvement with the implicated parties saying the individuals and entities are "separate and distinct" from the company. RPC corporate information officer Ma. Olivia T. Yabut-Misa said Profinda Holdings and BPC Power Corp. are separate juridical corporations where RPC has no interest contrary to the report that the Profinda owns more than 10% of the company's outstanding capital stock. The management also denied that RPC Retirement Fund is a subsidiary, or held and controlled by the company, as alleged in the CSG audit report. The RPC official also cleared Messrs. Betia and Cabaral as officers or employees of RPC. In the case of Mr. Navarra -- who currently sits as chief financial officer -- RPC said his transactions were his own. In a telephone interview with BusinessWorld, Ms. Misa said the management is currently studying possible legal action against PSE for undue, grave and irreparable injury the investigation has caused the company and its shareholders. Ms. Misa added that the probe has also affected ongoing negotiations with creditor banks for RPC's restructuring program to pay off its over one billion Philippine pesos (PhP) (US$22.37 million at PhP44.692:US$1) in debts. The company is asking its creditors for a 10-year period for the payment of its debts and working capital credit line. Its biggest creditor is Land Bank of the Philippines with more than PhP900 million ($20.13 million) in exposure. Meanwhile, Ms. Misa said discussions with a Malaysian holding firm interested to infuse equity into the company will push through despite the investigation. She added that representatives of the investor will arrive in the country in August 14 to discuss the terms of their proposed capital investment in RPC. The Malaysian group, listed in the Kuala Lumpur Stock Exchange, is a holding company with investments in aluminum manufacturing and trading. The company has expressed interest to acquire majority interest in RPC on a staggered basis. "The company doesn't have the facility to manufacture aluminum. So rather than start something new, they'd rather invest in a rolling mill which is what we have aside from being an extrusion company," RPC president and chief executive officer Jaime Y. Gonzales said. Proceeds of the equity infusion will be used by RPC to finance its working capital including the purchase of raw materials and new equipment. Ms. Misa said RPC will need a minimum of $12 million to operate a capacity that will bring profits to the company. RPC experienced financial difficulty when operations were affected by the huge cost of raw materials which has shot up at the height of the crisis. Currently, the company is operating at less than 50% of its full capacity. Meanwhile, the PSE has given brokers allegedly buying and selling heavily on RPC until Friday to explain their trading activity on the aluminum maker stock. PSE's Mr. Garcia has said the exchange is set to talk to six unnamed brokers for alleged involvement in wash sales and kiting activity in RPC. Guild Securities Inc., for one , cited as the top seller of RPC shares between May and June said it has only followed orders from its "client." A ranking official of the brokerage firm denied participation in manipulating shares of the firm. For the period under review, Guild has sold a total of PhP181.8 million ($4.06 million)worth of RPC shares. Japan-based DBP Daiwa Securities Inc., the top buyer during the same period, meanwhile refused to comment on unsettled liabilities by RPC to the brokerage firm. DBP bought a total of PhP308 million ($6.89 million) worth of RPC shares (based on Technistock Data) between May and June this year. A company source however said it has not received any letter from the PSE as of presstime. Well-placed PSE sources said the unsettled accounts of RPC with DBP and another foreign brokerage firm amounted to PhP9 million ($201,378). "The company however issued promissory notes," the PSE source said. Sources at the Business Conduct and Ethics Committee however said the RPC case is different from the price rigging case in BW Resources Corp. (BW). "The objective was not to make the public trade the shares but (the company) needed liquidity. They did not push the prices up but they needed to stay liquid," the source said. Confidence in the stock market has since suffered after a price fixing scandal involving shares of gaming firm BW Resources Corp. exploded late last year. (Business World 26-July-2000) REYNOLDS (PHILS.): Foreign firm keen in buying stake ---------------------------------------------------- Integrated aluminum company Reynolds Philippines Corp. is negotiating with a foreign strategic partner for a potential buy-in deal. Reynolds, which is currently under probe by the Philippine Stock Exchange on suspicion of illegal trading, told the bourse yesterday that its top management would meet with the management representatives of the potential strategic partner on Aug. 14. Reynolds corporate information officer Olivia Yabut-Misa said the potential partner was a publicly listed holding company that had proposed some capital investment into the company. "The company will be using any new capital infusion for working capital purposes to purchase raw materials and to finance a tension leveler capital expenditure that will enable the company to take advantage of the opportunities in the domestic and exports market," Misa said. "The additional working capital will also enable the company to maximize the operations of its Dasmari¤as, Cavite, plant." Reynolds was established in 1954 by Reynolds International Inc. of the United States. It manufactures and distributes aluminum sheets, foil and extruded sections used in the packaging, container, construction, appliance manufacturing and vehicle manufacturing industries. Reynolds was the biggest loser at the PSE yesterday, closing at P0.16 or 36 percent lower than Monday's close amid an ongoing probe by the PSE. The PSE has put Reynolds under close scrutiny on suspicion that the company might have resorted to "kiting" and "wash sale" activities to influence the trading of company shares. The belief was that Reynolds was trying to support its shares at a certain price level to protect the value of stocks offered as collateral to some creditor-banks. Reynolds is negotiating with creditor-banks for a 10-year restructuring of about P1 billion worth of debts. Based on its audit of Reynolds shares, the PSE, for its part, found out that the company might have engaged in "kiting," a practice that allows temporary funding or bridge financing through the advance payment of a selling transaction. At the same time, there were some indications that the company might be guilty of "wash sales" as the buyers and sellers of Reynolds shares appeared to be of one and the same group. Under existing regulations, it is unlawful to create a false or misleading appearance of active trading in any security registered on the exchange or to effect any transaction which involved no change in the beneficial ownership. The PSE Business Conduct and Ethics Committee (BCEC) has already summoned officials of Reynolds and a number of brokerage houses to a series of hearings within the next two weeks to wrap up the probe on the suspected illegal trading of company shares.( Philippine Daily Inquirer 26- July-2000) ================= S I N G A P O R E ================= SOGO (Singapore): Unredeemed vouchers have E&Y counting ------------------------------------------------------- Sogo (Singapore)'s interim judicial manager Ernst & Young is urgently trying to work out how many vouchers the stricken Japanese retailer has in circulation, since Sogo has refused to redeem vouchers since July 19, when it was granted interim judicial management. "To receive payment, voucher holders will have to file proof of debt," an Ernst & Young source said yesterday. "We will announce how they can go about doing this." Voucher holders are entitled to a pro-rated share of any proceeds arising from the judicial management process. "The holders of the vouchers are deemed unsecured creditors and, like all other creditors, they have to file their proof of debt," the Ernst & Young source said. Three Sogo companies in Singapore filed for interim judicial management last Wednesday to prevent any scramble by creditors for assets or forced liquidation by creditors. This came after parent Sogo Japan's move to file for bankruptcy protection cast a shadow over the Singapore companies' credit standing and operations. An angry BT reader complained his $80 gift voucher was not honoured when he tried to redeem it at Sogo's flagship Raffles City store on Saturday afternoon. "My colleagues gave me this voucher in February for my newborn child and they paid cash," he said. The man said he saw two women with about $300 of vouchers turned away. Besides the Raffles City outlet, Sogo leases space in the basement of Paragon building in Orchard Rd. Fellow Japanese retailer Yaohan went into judicial management in late 1997 with about $800,000 of outstanding vouchers in Singapore. Other retailers and suppliers including World of Sports, Mayfran and Safe Superstore came to the rescue then, accepting the vouchers provided specified sums were spent on their goods or at their outlets. Yaohan voucher holders who did not take up the offers filed proof of debt, for which they have yet to receive payment. (Business Times 26-July-2000) =============== T H A I L A N D =============== INT'L ENGINEERING CORP: Close to bt1.7B debt-rehab deal ------------------------------------------------------- International Engineering Corporation Plc says it is close to restructuring its 1.7-billion-baht debt to state-owned Krung Thai Bank. The mobile-phone distributor claims there is a "strong possibility" that the bank will agree to accept a 50% loss on its loan. At the same time, a foreign investment fund is interested in taking a stake of almost 50% in the company, according to IEC, which has debts to various creditors totalling four billion baht. IEC's troubles accelerated when it guaranteed a loan of 1.2 billion baht, borrowed by the M Group from Krung Thai in 1996. Media tycoon Sondhi Limthongkul is a major shareholder in the M Group, which has the biggest single stake in IEC. IEC president Jrarat Plingclasai said IEC had to wrap up debt restructuring with Krung Thai by Sept 9 prior to the entry of a holding company as IEC's partner. The partner, Inter Business Restructuring Co, is registered in Thailand and owned by an investment fund with bases in Singapore, Malaysia and Hong Kong. Mr Jrarat said the fund was interested in a 49.56% stake in IEC, equivalent to 43 million shares at 10 baht each. The fund, he claimed, had also agreed to acquire warrants issued by IEC for 430 million baht. He believed Krung Thai would accept a 50% "haircut" on the debt. "This is better than getting nothing if it goes ahead with a bankruptcy suit against the company," he said. IEC is owned by the M Group (16.41%), CMIC (13.08%), Goldman Sachs (6.97%), Total Access Communication (5.8%) and the Bank of Tokyo-Mitsubishi (Luxembourg) with 5.7%, as well as many small shareholders each with less than 5%. Mr Jrarat said that the stakes of all shareholders would be halved if the foreign company became a partner. However, the company had set a condition that IEC first restructure its debt to the bank. If this was done by Sept 9, the partner would pump new funds into IEC within the following 10 days, he said. The owners of Inter Business Restructuring have investments in telecommunications, property and electricity ventures in Hong Kong, Malaysia and Singapore, and are said to be interested in similar deals in Thailand. Mr Jrarat said the company was attracted by IEC's potential as a mobile-phone operator and Internet service provider. IEC's main business is distributing mobile phones. This year, it expects revenue of 1.2 billion baht, up from 1.025 billion last year. Inter Business Restructuring would likely be a short-term investor, Mr Jrarat said. In the meantime, IEC would look for a long-term partner. However, Inter Business Restructuring would likely help IEC expand its sales outlets to 1,000 from 500 nationwide. IEC would also invest 300 million baht to develop its Internet and e- commerce business, he said. (Bangkok Post 26-July-2000) KRUNG THAI BANK: Posts 864.1 million baht loss ----------------------------------------------- Krung Thai Bank PCL reported a second-quarter net loss of 864.1 million baht ($21.5 million), narrower than last year's 11.54 billion baht loss. In a filing to the Stock Exchange of Thailand the state bank attributed the result to a loan-loss provisioning of 738.6 million baht in the quarter. The bank's preprovisioning loss was 125.5 million baht. Interest and dividend income in the period was 9.83 billion baht, down from 12.42 billion last year. Meanwhile, interest expenses totaled 7.06 billion baht, down from 11.24 billion. Net interest and dividend income was 2.77 billion baht, up from 1.17 billion baht before the provisioning, the bank said. (West Clip & Dow Jones Newswires 26- July-2000) NATIONAL FINANCE PCL: Reports Q2 net losses ------------------------------------------- National Finance reported Q2 unaudited net losses of 1.7bn bt, compared with a net profit of 48.2m bt for the same period last year. It said the losses were due to an increase in the allowance for doubtful accounts and bad debt. Provision set aside for bad loans is now 100%. It was able to make an operating profit of 556m bt and earned 636m bt from interest and dividend income, higher than last year. It made a 198m bt gain from securities trading. (Bangkok Post 25-July-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, James Philip P. Jover and Maria Vyrna Ni¤eza, Editors. Copyright 2000. All rights reserved. ISSN: 1520-9482. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR -- Asia Pacific subscription rate is $575 for 6 months delivered via e-mail. 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