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/raid1/www/Hosts/bankrupt/TCRAP_Public/000816.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 Wednesday, August 16, 2000, Vol. 3, No. 159 Headlines * A U S T R A L I A * TRANSFIELD: Family fued threatens firm's existence VIRGIN HELICOPTERS: Faces collapse after suit threats VIRGIN HILLS WINERY: Faces collapse after suit threats * C H I N A & H O N G K O N G * KIAN HO BEARINGS LTD.: Completes banking facilities rehab RENREN.COM: Axes 102 staff in cost-cutting campaign SHENZHEN CHINA BICYCLE CO.: No Gov't funds to aid SHENZHEN LIONDA HLDGS.CO.: No Gov't funds to aid TOM.COM: Stock price drops over 60 percent * J A P A N * BRIDGESTONE CORP: Moody's downgrades outlook HIEI SANGYO: Realtor fails, leaves 650B yen in debts * K O R E A * DAEWOO HEAVY INDUSTRIES: Suffers $2.3B interim loss HYUNDAI ENGIN.& CONSTR.: Faces $649.2M debt by Sept. HYUNDAI GROUP: Creditors back Hyundai plan HYUNDAI GROUP: FTC to audit HYUNDAI MOTOR: New spinoff planned for it ILDONG PHARMACEUTICAL CO: Bank control to be dropped LG GROUP: FTC to audit MUHAK CO: To be released from workout arrangement SAMSUNG GROUP: FTC to audit SHINDONGBANG GROUP: Creditors name Chase sale manager SK GROUP: FTC to audit * M A L A Y S I A * PAN MALAYSIA: Firm sale proceeds used in debt reduction * P H I L I P P I N E S * ALL ASIA SECURS.MGMT.: SEC fines for rules violations FIRST ORIENT SECURITIES: SEC fines for rules violations HDI SECURITIES: SEC fines for rules violations RCBC SECURITIES: SEC fines for rules violations UCPB SECURITIES: SEC fines for rules violations UNIWIDE GROUP: BPI agrees to join rehab; deal this week VICKERS BALLAS SECURS.PHILS.: SEC fines for rules viols. * S I N G A P O R E * SHOWPLA ASIA: Sports retailer to rescue Showpla * T H A I L A N D * KRUNG THAI BANK: To transfer Bt66M of bad loans to AMC THAI AIRWAYS INT'L: Posts larger Q3 loss than expected ================= A U S T R A L I A ================= TRANSFIELD: Family fued threatens firm's existence -------------------------------------------------- The bitter and public family feud at Transfield spilled into the courts yesterday, and former managing director Marco Belgiorno-Zegna admitted his actions could deprive his father, Franco Belgiorno-Nettis, of his lifetime's work. While Mr Belgiorno-Zegna said he regretted moving to wind up the construction giant, he believed this was necessary to maximise his own financial position. Mr Belgiorno-Zegna is suing his father and his two younger brothers, Luca and Guido Belgiorno-Nettis, in an attempt to wind up Transfield's ultimate holding company Exben, alleging the defendants breached a corporate governance agreement. The action will decide the fate of the 40-year-old company, estimated to be worth between $350 million and $600 million. Defence counsel Bruce Oslington QC told the NSW Supreme Court yesterday that by attempting to wind up Exben, Mr Belgiorno-Zegna would deny his father the ownership of his lifetime's work and also deny him an opportunity to share in the distribution from the sale of the company. Asked under cross-examination if he was aware of this, Mr Belgiorno-Zegna said: "I'm not setting out to achieve that. It's a consequence of some things that have happened, unfortunately, regrettably this is the outcome of this current action I've had to take." Mr Belgiorno-Zegna also told the court that he was aware he would get a lot more money by getting Exben - Transfield's ultimate holding company - wound up, than he would by realising his shares through the pre-emptive rights provisions in the company's articles. When asked by Mr Oslington whether he was maximising his financial position at the expense of his father, Mr Belgiorno-Zegna replied: "Yes, I think regrettably, yes." Earlier, counsel for Mr Belgiorno-Zegna, Noel Magee QC, told the court that his client had been "neutralised'' by the family and was effectively rendered unemployed. Mr Magee told the court his client was entitled to remain in his position as managing director for a further three years when he was deposed by his father and brothers in December last year. The court was told of a bitter family dispute, which came to a head in 1996 when Guido and Luco wanted the company to bid for the Bakun hydro-electric power project in The Philippines. Mr Magee said his client believed the project was too risky and that the other two brothers had their father, Franco Belgiorno-Nettis, approve the contract by exercising his deciding vote. The case continues before the NSW Chief Justice in Equity, Justice David Hodgson, today. (The Australian 15-Aug-2000) VIRGIN HELICOPTERS: Faces collapse after suit threats VIRGIN HILLS WINERY: Faces collapse after suit threats ------------------------------------------------------ Numerous small businesses with Virgin in their names faced bankruptcy due to threats by Virgin Airlines to sue for breach of copyright, Canberra businessman Fergus Frater said today. The Virgin Helicopters proprietor said each business was being sued over alleged use of the international trademark, Virgin, by billionaire airline owner Sir Richard Branson. Mr Frater said that meant disconnecting the phone, registering a new trading name, reprinting stationery and redoing advertising. "It'll cost me $60,000 that I just can't afford to do all that," he said in a statement. Mr Frater said no problems arose when he registered his business and company name two years ago, took out an air operator's certificate and obtained a New South Wales air transport licence. He said he accepted he would have to change his firm's name but the timing was bad. "It's too late to get into the Yellow Pages and a Telstra diverson will cost $20,000 alone," Mr Frater said. "I'd virtually have to shut up shop for the next 12 months." Virgin Airlines' Australian subsidiary, Virgin Blue, is due to take to the skies in the next few weeks. Virgin lawyers have already taken action against some companies who have the word Virgin in their names, despite them not operating businesses which duplicate Virgin Blue's business. Mr Frater said he received a Virgin letter of demand three months ago, but media coverage led to an assurance from Sir Richard that lawyers had been over-zealous, it was all a big mistake and he would apologise. Mr Frater said he had received no such apology, instead getting another demand last Friday that he cease operating immediately. "I know I can't beat him but I'm not trying to. All I want is a bit of time to get things in order," he said. Other virgins deal in finance, campervans, cotton, balloon flights, wheel repairs, advertising, flowers, home services, car rentals, videos, computers and cosmetic and also include a backpackers hostel, a hair salon and Virgin Hills Winery. (AAP Information Services 15-Aug-2000) ============================== C H I N A & H O N G K O N G ============================== KIAN HO BEARINGS LTD.: Completes banking facilities rehab --------------------------------------------------------- Kian Ho Bearings Ltd said it has completed the restructuring of its banking facilities with its bankers. In a statement, the company said that under the arrangement, it has granted an option to its principal bankers, in proportion to their facilities limits, to subscribe either for cash or to convert a portion of the amount owing under their respective facilities for up to 12.483 mln new ordinary shares comprising 8 pct of the company's existing share capital. The first 3.12 mln shares will be issued at 0.15 sgd per share while the remaining 9.362 mln shares will be issued at a price equal to a 15 pct discount from the average of the dealt prices. The option can be exercised by the principal bankers at any time after 14 August, 2001 and before three years time from 14 August 2000. The restructured banking facilities are adequate to meet Kian Ho's operational needs, it added. (Asia Gateway 15- Aug-2000) RENREN.COM: Axes 102 staff in cost-cutting campaign --------------------------------------------------- Renren Media, operator of Greater China portal renren.com, has become the latest dotcom company to slash its workforce amid the downturn in the Internet sector. The mainboard-listed company yesterday announced it would axe 102 staff - more than a third of its workforce - in a bid to contain its burn rate while revenues were still at just a trickle. The staff cuts, the biggest the sector has seen so far, would reduce the company's operating costs to about US$1 million a month. Chairman and chief executive Michael Robinson said the restructuring would enable renren to stay afloat for another two years, with minimal revenues. "Any fiscally responsible company would do this," Mr Robinson said. "I think every CEO [of a dotcom] in [the mainland] will be doing this sooner or later." Since June, a total of nearly 300 jobs are known to have been cut from prominent portals Tom.com, nextmedia.com, appledaily.com and SCMP.com. Analysts shared Mr Robinson's view that this was just the beginning of a sector-wide trend. Investors are becoming increasingly sceptical of online advertising in Asia, which is the prime revenue stream of most of the region's dotcoms. Although the forecasts vary, the Web advertising pie is expected to be far too small to sustain the majority of these companies in the short run. Renren said it sacked the employees from its marketing, product development, technology and administration departments. The only department spared was its sales team, which is needed to pitch Web advertisements and marketing solutions to clients. Analysts said the downsizing was beneficial to renren and believed the company would be among the few to survive the downturn. Renren is among the few cash-rich dotcoms based in the SAR, as it managed to tap the stock market shortly before the sentiment towards Internet issues turned sour. The dotcom staged a backdoor listing through loss-making car dealer Ankor Holdings on March 15, after securing investment from a consortium of venture capitalists led by News Corp's Internet arm and J H Whitney and Co. The deal gave the listed company, which changed its name to renren Media, HK$229 million in cash. Ankor's share price more than doubled to HK$1.17 on March 15 following the announcement of the backdoor listing. Listed as renren, it has since plunged 90.2 per cent, closing yesterday at 11.4 HK cents, and limiting the prospects of further fund- raising in the short term. Jay Chang, Internet analyst at Credit Suisse First Boston, said portals such as renren would do well if they focused on a niche, increased their audience, provided value-added services and were able to convince advertisers. "In the long term, we believe there is still a lot of potential in [the mainland's] online advertising market," Mr Chang said. Renren said its portal had five million unique users per month and its revenues were growing at close to 300 per cent per quarter. Following the restructuring, the company is planning to focus on providing online marketing solutions to multinational companies looking to enter the mainland market. Renren.com is among the top 10 most popular Internet portals in the mainland although its precise ranking is not known. (South China Morning Post 15-Aug-2000) SHENZHEN CHINA BICYCLE CO.: No Gov't funds to aid SHENZHEN LIONDA HLDGS.CO.: No Gov't funds to aid ------------------------------------------------- The Shenzhen city government is not prepared to commit any funds to help ease Shenzhen Lionda Holdings Co Ltd's debt burden, Lionda company secretary Wei Dan said. In an interview with AFX-ASIA, Wei said the company's liquidity problems have seriously disrupted its operations but it cannot expect government help to solve these problems and is unsure how these problems will be solved. Wei said Lionda's outstanding debts and loan guarantees currently amount to 2.3 bln yuan, while the company's interim report shows that its gross assets at end-June amounted to 1.5 bln yuan. He said the company's guarantees of bank loans to other companies are effectively debts, since the company is expected to be required to honour them. The company earlier reported a net loss of 47.4 mln yuan in the six months to June, according to Chinese accounting standards, against a net loss of 49.9 mln the previous year. Sales amounted to 410.2 mln yuan, down from 577.5 mln the year previously. Earlier this month, the company said its stakes in six companies have been frozen by court order as part of a settlement in a debt case, with another holding due to be auctioned, while the company is also required to pay 3.82 mln usd as a settlement in an arbitration ruling and 15 mln yuan to cover loans guaranteed by the firm. "(In the first half) no banks were willing to lend to the company, and a lot of the firm's daily activity involved trying to handle the banks' efforts to recover their loans. It also involved dealing with court rulings over debt settlements," Wei said. "It is quite difficult to find a way to solve these (debt) problems. It seems useless to put our hope in our majority shareholder (Shenzhen government- controlled Shenzhen Asset Investment Management Co Ltd). "Calculations last year already indicated that any restructuring would require an injection of at least 1 bln yuan. Nobody is going to give us this much money," Wei added. "Other local governments usually give very special care to their state-owned enterprises, but Shenzhen is different. It gives no special treatment to state enterprises. Shenzhen is the city where the free-market system is most developed, and enterprises have to compete in the same environment, regardless of their ownership. It is not necessary for the government to expend effort supporting one state enterprise." Wei also denied speculation that Shenzhen Asset Investment has already allocated funds to help settle Lionda's debt problems. "This is just a dream. If it were true we'd all be too happy to sleep," he said. On the subject of the company's investments, Wei noted that Shenzhen China Bicycle Co Ltd, in which Lionda has a 23.3- pct stake, was able to restructure its overseas debt last year by persuading foreign banks to write off more than 60 mln usd in loans, and is now seeking to restructure its domestic debt. However, China Bicycle cannot expect to achieve the same level of success with the restructuring of its domestic debt, he said. A 900 mln yuan debt to the Industrial and Commercial Bank, plus outstanding interest, has already been transferred to Huarong Asset Management Co Ltd, but China Bicycle will not be entitled to have this debt converted into equity, he said. "There are very strict requirements for debt conversions, and China Bicycle does not meet these. There is also no precedent for the conversion of a joint-venture company's debts into equity," he said. China Bicycle earlier reported a net loss of 64.8 mln yuan in the six months to June against a net loss of 97.6 mln the year before, on lower sales of 26.5 mln yuan against 29.4 mln previously. Lionda's A-shares closed up 0.25 yuan at 11.16, while its B-shares closed down 0.04 hkd at 1.61. China Bicycle's A- shares closed down 0.09 yuan at 8.73, while its B-shares closed down 0.05 hkd at 1.18 on 1.5 mln shares. (AFX News Limited 15-Aug-2000) TOM.COM: Stock price drops over 60 percent ------------------------------------------ The share price of TOM.com, Li Ka-Shing's Internet venture, plunged from its all-time high of HK$14.30 on March 7 to HK$5.70 on Aug. 11, sending a chill through investors caught up in the Internet mania. Recent news of a jobs cut and a half-year loss of HK$194mil accelerated the company's downtrend, resulting in investors beginning to ponder its earnings potential. However, TOM.com is going ahead with its acquisition plan despite criticisms of high burning rates. Its chief executive Sing Wang last Sunday announced that TOM.Com had signed a memorandum of understanding to buy all existing shares of Shawei, the operator of sports web site Shawei.com for US$20mil and a 70% stake in YC Press, sports advertising and event management firm in China, for US$30mil. The acquisition is expected to generate annual revenue of HK$230mil, Sing said. The stock was suspended from trading yesterday pending an announcement. The company was floated on the Growth Enterprises Market (GEM) on March 1 at an offer price of HK$1.48-HK$1.78. TOM.Com's listing offer in February caused a stampede when more than 300,000 people applied for the shares hoping to rake in quick profits. (Star Online 15-Aug-2000) ========= J A P A N ========= BRIDGESTONE CORP: Moody's downgrades outlook -------------------------------------------- Moody's Investors Service has changed Bridgestone Corp.'s rating outlook (A2) to negative from positive, the U.S. rating agency reports. The outlook change was prompted by the recent announcement that Bridgestone/Firestone, Inc. will voluntarily recall 6.5 million tires produced in North America to respond to increased consumers' safety concerns. Moody's said it would monitor the potential harm to BFS's brand image and operations from the lawsuits. Moody's announcement came after competitor Standard & Poor's threatened Thursday to downgrade its rating for Bridgestone. HIEI SANGYO: Realtor fails, leaves 650B yen in debts ---------------------------------------------------- Tokyo-based real estate company Hiei Sangyo has filed with the Tokyo District Court for special liquidation. The filing becomes the sixth largest corporate bankruptcy this year at about 450 billion yen in liabilities, according to private credit research institute Teikoku databank. Hier's two affiliates -- Hiei Tatemono and Hiei Finance Service - also have collapsed. Their combined liabilities total approximately 650 billion yen, according to Teikoku Databank. Capitalized Hiei Sangyo was established in 1964, being capitalized by major construction company Tobishima Corp. The firm expanded by actively investing in condominium and office building developments. At its height in 1984, the company posted 108.6 billion yen in operating revenues. When the Japanese economy slid in the early 1990s, the Hiei Sangyo group suffered from declining revenues and interest payments on huge borrowings. In fiscal 1993, Hiei Sangyo incurred a capital deficit through a net operating loss of 64.6 billion yen. The company devised a rehabilitation plan calling for streamlining its business and focusing on rental and management of properties. The efforts did not lead to the management rehabilitation expected, however. The company's capital deficit expanded to some 480 billion yen in fiscal 1998. Last Friday, Hiei Sangyo, Hiei Tatemono and Hiei Finance Service filed with the court for special liquidation. Previously, the companies had each adopted resolutions at mid-May shareholders' meetings that the companies would dissolve at the end of that month. ========= K O R E A ========= DAEWOO HEAVY INDUSTRIES: Suffers $2.3B interim loss --------------------------------------------------- Daewoo Heavy Industries, the world's second-largest shipbuilder, has posted a first-half loss as it wrote down the value of group assets and its construction equipment business lost money. The company said net loss in the six months to June was 337.7 billion won (about HK$2.36 billion), against net income of 53.2 billion won in the period last year. Daewoo Heavy, which has in the past suffered from its ties to unprofitable companies in the Daewoo Group, is undergoing a reorganisation to shed money-losing operations. The plan is to split the shipbuilding and construction businesses, leaving the remaining company with non- operating assets, including stakes in Daewoo Motor. The split is set for September 1. "I think the shipbuilding business can keep itself afloat after the spin-off," said Song Jae-hak, a transport analyst at Daishin Economic Research Institute. "The company's competitive businesses will be freed up after cutting all equity ties with weak group units." Daewoo Heavy's construction machinery business, struggling with weak demand,generated an operating loss of 29.7 billion won for the half. (South China Morning Post, Bloomberg 15-Aug-2000) HYUNDAI ENGIN.& CONSTR.: Faces $649.2M debt by Sept. ---------------------------------------------------- Hyundai Engineering & Construction's debts hitting maturity between Monday and the end of September will amount to 775.2 billion won ($649.2 million), the main creditor Korea Exchange Bank says. Among the debts, 426.2 billion won is due by the end of this month and 349 billion won by the end of next month. The total breaks down to 504 billion won from banks, 130 billion won from company papers, 62.5 billion won from insurance companies, 30 billion won from company bonds, and 48.7 billion won from KHGC (Korea Housing Guarantee Co). "As agreed in a meeting of creditor bank presidents this morning, maturity periods for the 504 billion won from banks will be extended," a KEB official said. "Along with this, KEB will ask non-banking financial institutions to extend the maturity on 130 billion won worth of CPs." Loans from insurance companies and KHGC don't need to be extended since they are related to a welfare fund for employees, but company bonds should be reimbursed, he said. He stressed that Hyundai Engineering and Construction can solve short-term liquidity problems by itself from October only if financial institutions extend loans that hit maturity before then. (Asia Pulse 14-Aug-2000) HYUNDAI GROUP: Creditors back Hyundai plan ------------------------------------------ Creditor banks for Hyundai on Monday approved a restructuring plan for South Korea's biggest conglomerate that will speed the group's break-up, but analysts were sceptical whether it would solve Hyundai's debt problems. Hyundai announced on Sunday that it would spin off its profitable car and shipbuilding units and reduce cross- holdings by selling stakes held by the parent company, Hyundai Engineering and Construction. "The creditors appear to have won one battle in what promises to be a long process to restructure Hyundai," said Brian Hunsaker, research head at Dresdner Kleinwort Benson in Seoul. The Seoul stock market, which had been depressed by Hyundai's financial problems, gave modest approval to the plan, with the index rising 1.5 per cent to close at Won733.25 on Monday. Creditors had pressed Hyundai to undertake corporate reforms and sell assets after Hyundai Engineering nearly defaulted on maturing loans last month. They agreed to freeze payment for two months on Won775bn ($695m) in debt owed by Hyundai Engineering by the end of September. "The restructuring is better than the markets expected, but it still falls short of what is needed," said Nitin Parekh, regional equity strategist at Credit Suisse First Boston in Hong Kong. It is uncertain whether Hyundai can raise a promised Won 1,520 billion through asset sales to reduce Hyundai Engineering's debts to Won 4,000 billion from Won 5,400 billion by the end of the year. Moreover, there are worries that Hyundai Engineering might need new financial aid later if the domestic construction market remains depressed. Hyundai Engineering forms the core of the holdings controlled by Chung Mong-hun, the favoured son of Hyundai's founder. His other companies include Hyundai Electronics and the group's troubled financial units. The financial problems at Hyundai Engineering could spread to his other businesses, since it acts as a holding company through cross-shareholdings and loan guarantees. "Hyundai could face more financial problems if the economy slows, given the group's high debt levels," said Mr Parekh. But analysts applauded the separation from the rest of the group of Hyundai Motor and Hyundai Heavy Industries, which are controlled by two other sons of the Hyundai founder. This would protect them from a possible debt crisis affecting the rest of the group as they unwind cross- holdings and loan guarantees. "The cash flow at Hyundai Motor and Hyundai Heavy is strong and they are able to service their debts. They will no longer have to subsidise weak Hyundai businesses," said Mr Hunsaker. (Financial Times 14-Aug-2000) HYUNDAI GROUP: FTC to audit LG GROUP: FTC to audit SAMSUNG GROUP: FTC to audit SK GROUP: FTC to audit --------------------------- Checking whether there has been any improvement in the moral fiber of the chaebol, the Fair Trade Commission is today starting audits on the top 4 conglomerates - Hyundai, Samsung, LG and SK - to uncover any traces of wrongful intragroup transactions. Specifically, the antitrust watchdog said it will focus its inspection of Hyundai and Samsung on discovering evidence of unlawful nepotism, whereby chaebol owners are suspected of transferring their wealth and control onto their children via deceptive use of subsidiaries and venture companies. The audit on LG and SK, will concentrate on uncovering signs of unlawful intragroup transactions and illegal subsidies onto troubled affiliates, officials said. "The FTC will disclose whether the top 4 groups have been involved in illegal intragroup deals and wrongful behavior by second and third generation chaebol owners," said Ahn Heui-won, a senior FTC official. "The commission might even tap into their bank accounts, if deemed necessary." The watchdog's team of inspectors will examine the books of 12 Hyundai, 12 Samsung, seven LG and five SK affiliates for a period of 56 days until Oct. 14. The audit is the fourth of its kind on the top chaebol groups since 1998. Subject to examination will be all transactions performed between January last year until July this year. The FTC will look for evidence of illegal support of venture and split off companies, operation of disguised subsidiaries, acts of illegal subsidies by the groups' corporate restructuring headquarters, violations of mutual equity investment restrictions, failure to notify directors on large-scale internal transactions and unfair intragroup support. The FTC will also check whether Lee Jae-yong, son of Samsung Group Chairman Lee Kun-hee, has been grafting illegal support for his companies such as e-Samsung and e- Samsung International from the parent group and other affiliates. The watchdog will also investigate Chung Eui- sun, son of Hyundai Motors Chairman Chung Mong-koo on similar charges, officials said. The probe will also reveal whether there is any truth to the suspected laundering of company stock through a third- party foreign bank, the heated dispute between Hyundai's Electronics and Heavy Industry divisions and Hyundai Securities' reputed rampant practice of unlawful intragroup deals. The top 5 chaebol - including the now-dismantled Daewoo group - have already been subject to probes by the antitrust watchdog three times since 1998. The FTC has already imposed some 170.8 billion won in fines onto the groups for illegal intragroup transactions worth 17.85 trillion won, which it estimates resulted in 358 billion won in illicit support of its subsidiaries. Also, the FTC announced late last week that it would slap fines in the order of 17.39 billion won to seven of the second-tier chaebol (falling between the top 6-30 conglomerates) for unlawful intragroup transactions of 3.96 trillion won, which resulted in unfair subsidies of 49.9 billion won. State run companies will be subject to similar probes come October, officials added. (Korea Herald 15-Aug-2000) HYUNDAI MOTOR: New spinoff planned for it ----------------------------------------- Hyundai Motor is expected to be able to declare its rebirth as an independent auto maker company in September as the Hyundai Group has finally decided to spin it off as part of its restructuring and self-help plans. The new group will include Hyundai Motor, Kia Motors, Hyundai Precision & Ind., Hyundai Pipe and Hyundai Capital. Other companies expected to join the fold are Hyundai Space & Aircraft, Hyundai Autoever.com and Hyundai EH.com. Market watchers said that Inchon Iron & Steel and its affiliate are also likely to join the new group later because they provide complimentary functions. Hyundai Motor Chairman Chung Mong-koo holds 4.7 percent stakes in Inchon Iron. The auto group, excluding Inchon Iron and its affiliate, had 28.5 trillion in assets as of the end of last year, the fifth largest in the Korean chaebol ranking. Its combined sales last year amounted to 25.2 trillion won ($22.6 billion), also the fifth among chaebol groups. It is likely to climb higher on the ladder with sales expected to hit 35 trillion won this year. Hyundai Motor alone racked up record sales of 8.4 trillion won in the first half of this year, netting 310 billion won in profits. The government's recognition of the auto group as a "large business group," the official term for chaebol, is to be made April 1 next year when the Fair Trade Commission will update its chaebol list. Till then, it will not be subject to the panoply of regulations applied to big business corporations, including the ban on inter-subsidiary debt guarantees and the rule limiting a subsidiary's equity investment in other firms to 25 percent of its net asset. Analysts say that the secession from the parent Hyundai Group is expected to give Hyundai Motor an opportunity to transform itself into a world-class automaker. They noted that the company would be cleared of the persistent uncertainty about its status caused by the dispute between the two brothers, Chung Mong-koo and Hyundai Group owner Chung Mong-hun. "The elimination of the uncertainty that has been lingering since March this year will give a big boost to the morale of the company's management and employees," an analyst said. To make a new start, Hyundai Motor plans to renew the company atmosphere in September, an official said. "Freed from controversies, we will be able to concentrate on sharpening our competitive edge," he said. Hyundai Motor's goal is to become the world's fifth largest automaker in the near future. For this, it is intent on strengthening strategic ties with DaimlerChrysler, which has recently secured a 10-percent stake. Along with five other global auto giants, Hyundai Motor has joined a project to develop a fuel-cell car powered by hydrogen, methanol and gasoline by 2003. In another project, Hyundai Motor will open factories in Europe and the United States to expand the production capacity for a world car the company is co-developing with Mitshbishi. The car will be supplied to DaimlerChrysler. The priority, however, is on improving external credibility; for those plans and projects will not be realized unless the company recovers a credit rating high enough to attract investors. The company is stepping up efforts to improve its image and relations with overseas investors. Company affiliates will also focus on maximizing synergy effects by focusing on their own roles within the group: Hyundai Motor will concentrate on producing passenger cars, Kia Motor recreational vehicles, Hyundai Precision & Ind. auto parts, Inchon Iron & Steel and Hyundai Pipe the supply of raw materials and Hyundai Capital finance. (Korea Herald 15- Aug-2000) ILDONG PHARMACEUTICAL CO: Bank control to be dropped ---------------------------------------------------- The Korea Development Bank (KDB) said yesterday it would allow Ildong Pharmaceutical Co. to implement its own workout program. KDB, the company's main creditor, has been directly involved in implementing the debt-rescheduling and rehabilitation program, which was drawn up in consultation with other creditors. The bank said its decision was prompted by a turnaround in Ildong's performance and a significant reduction in its guarantee burden toward Maxon Electronics as a result of Maxson's sale to Sewon Telecom. Ildong earned 5.2 billion won in net profit last year on sales of 88.5 billion won, a sharp improvement from 50.1 billion in losses. The company is expected to post 8 billion won in net profit this year. A large portion of the company's guarantee on Maxon's debt amounting to 64.6 billion won is expected to be resolved when the sale of the electronics company is completed. Creditors of Maxon agreed to convert a significant part of its debt into equities before selling the company to Sewon Telecom. (Korea Herald 15-Aug-2000) MUHAK CO: To be released from workout arrangement ------------------------------------------------- Muhak Co., the nation's fourth largest producer of soju, a popular Korean liquor, soon is expected to be released from its workout arrangement. Kyongnam Bank reported yesterday that creditors will meet Aug. 18 to decide whether to terminate the workout program imposed on the company last year to relieve it of its huge debt. A bank official said the company's eight creditors are expected to accept the proposal to allow the company to manage its operations toward normalization. A member of the over-the-counter Kosdaq market, Muhak, based in Masan, South Kyongsang Province, became insolvent as a result of heavy guarantees on debts of its sister firms which went belly up following the financial crisis in late 1997. (Korea Herald 15-Aug-2000) SHINDONGBANG GROUP: Creditors name Chase sale manager ----------------------------------------------------- Chase Manhattan has been named by creditors of Shindongbang Group as lead manager for the sale of the business group. Hanvit Bank, a leading creditor, said the creditor group chose the US bank was chosen as lead manager over KPMG and PWC. The creditors and Chase Manhattan now will begin looking for prospective purchasers of the bankrupt business group after the evaluation of its assets is completed. =============== M A L A Y S I A =============== PAN MALAYSIA: Firm sale proceeds used in debt reduction ------------------------------------------------------- Pan Malaysia Holdings Bhd plans to sell its entire equity interest of 10 million shares in Pengkalen Concrete Sdn Bhd to Supermix Concrete (M) Sdn Bhd, a subsidiary of Malayan Cement Bhd, for RM7.3mil and use the proceeds for debt reduction and working capital. In a filing with the KLSE, Pan Malaysia confirmed the sale agreement had been signed over the weekend. It said the sale price would be adjusted after further financial due diligence. The entirety of sale proceeds was to be used for working capital purposes and/or to retire the group's bank borrowings. The sale is part of the company's continued efforts to divest its non-core assets and focus on financial services activities, primarily stockbroking. ===================== P H I L I P P I N E S ===================== ALL ASIA SECURS.MGMT.: SEC fines for rules violations FIRST ORIENT SECURITIES: SEC fines for rules violations HDI SECURITIES: SEC fines for rules violations RCBC SECURITIES: SEC fines for rules violations UCPB SECURITIES: SEC fines for rules violations VICKERS BALLAS SECURS.PHILS.: SEC fines for rules viols. -------------------------------------------------------- The Securities Clearing Corp. of the Philippines (SCCP) has fined six broker-firms found to have violated settlement rules with respect to stock transactions involving aluminum maker Reynolds Philippines Corp. Among the errant broker-firms include RCBC Securities, First Orient Securities Inc., Vickers Ballas Securities Phils., UCPB Securities, All Asia Securities Management, and HDI Securities. Ramon T. Garcia, Philippine Stock Exchange president and concurrent president of SCCP, said there had been 10 instances of settlement violations by the six brokers for the period June 30 to Aug. 4 this year. All fines due had already been settled except for All Asia which has an overdue account of P20,000. All Asia committed four settlement violations while First Orient was assessed a fine of P10,000 for two offenses. Under the SCCP rules, all cash payments and securities delivery should be settled by 11 a.m. on the fourth day from transaction date. Garcia also reported that Raul Ortiz, current head of the PSE trading and settlement department, was appointed as officer-in-charge of the SCCP. He replaced Carlos Velayo who had been put under preventive suspension. Ortiz had been instructed to report regularly to the SCCP president on the status of SCCP's operations. Garcia also assured the commission that the SCCP board is "cognizant of the crucial role reposed upon the SCCP in our equities market and that we have taken appropriate steps to ensure that no void in management exists during Velayo's legal suspension." The SCCP earlier said that there have been 13 brokers who have failed to put up collateral for the mark-to-market system. The mark-to-market collateral deposit is intended to cover any market movement loss in case a member defaults on its obligations due to temporary illiquidity, insolvency or bankruptcy. The SCCP will make daily mark-to-market calculations to determine the total net negative exposure of all the unsettled trades of each clearing broker. (Manila Times 16-Aug-2000) UNIWIDE GROUP: BPI agrees to join rehab; deal this week ------------------------------------------------------- Creditor-banks of debt-ridden Uniwide Holdings Inc. are convening today to fine-tune the remaining details of a restructuring deal for the lumbering retail giant's P10 billion in debts. The consortium of creditor banks are meeting this morning at the Equitable Tower on Paseo de Roxas Avenue, Makati City. The creditor-banks of Uniwide are Bank of the Philippine Islands, Land Bank of the Philippines, ING Bank, Global Business Bank, United Coconut Planters Bank, Asian Bank, Allied Bank, Philippine National Bank and East Asia Capital Corp. In an interview with the INQUIRER, a BPI official yesterday confirmed that the bank last week signed a memorandum of understanding (MOU) with Uniwide for the proposed rehabilitation plan. "The bank signed an MOU with Uniwide last week. The MOA approved the rehabilitation plan of the (Securities and Exchange Commission). The meeting (today) will deal with documentation and implement commitments. It was the same agreement the other creditor-banks of Uniwide entered into with the firm," the BPI official said. The creditor-banks are scheduled to sign anytime this week the debt-restructuring agreement that would pave the way for French retail giant Casino Guichard Perrachon to take over UHI. Last February, Casino Guichard Perrachon entered into a memorandum of understanding with the Uniwide group to infuse P3.57 billion for an 80-percent stake in the firm, which controls the chain of Uniwide convenience and warehouse stores nationwide. The funds to be raised from the French group would be used to pay the P10 billion in loans owed by Uniwide to its creditor-banks that were not settled by dacion en pago arrangements. Casino Guichard's investment, however, would only be made upon the successful implementation of the debt restructuring. "The investment is expected to spur economic activity and benefit related industries. About 4,000 direct jobs will be saved, more than 2,000 suppliers will resume business stalled by the problems of Uniwide, more than 200,000 suppliers will regain employment and the welfare of more than a million dependents will be promoted," Uniwide said. The Uniwide Group in June 1999 filed a petition for debt relief with the SEC over obligations from various creditor groups amounting to more than P11 billion. (Philippine Daily Inquirer 15- August-2000) ================= S I N G A P O R E ================= SHOWPLA ASIA: Sports retailer to rescue Showpla ----------------------------------------------- Royal Sporting House (RSH) has emerged as the white knight for beleaguered Showpla Asia -- a move which has incurred the wrath of several shareholders, given the "poor swap ratio." Under a deal stitched up by judicial managers Ernst & Young, Showpla shareholders will be given three Royal Sporting House shares, worth a total of 80 cents, for every 1,000 shares of Showpla they own. This values each existing Showpla share at just 0.08 cent. The shares, which have been suspended since March last year, were last traded at 5-1/2 cents -- a far cry from the 37 cents they hit during their heyday in early 1996. As a result, some shareholders said they were shortchanged by the deal. In fact, one disgruntled shareholder who decloined to be named wrote to The Straits Times called it "more like daylight robbery." But industry-watchers point to a recent deal which was cut, in which L&M Group Investments will acquire about 90 per cent of debt-laden Van der Horst (VDH). In that deal, VDH shareholders are also expected to get virtually nothing. Under that deal, L&M will pay $5 million for VDH, on top of the $11 million it will fork out for its Indonesian assets. It will also assume VDH's debt. A source said for the same $5 million Royal Sporting House is paying for Showpla -- $1 million of which is in cash and the remainder in stock -- it will get a hollow shell of a business. Showpla's assets, which include three plastic- components plants in China and another in India -- will all be sold to help pay off the more than $200 million in group debts that it is saddled with. "When you have debts exceeding $200 million and realisable assets of less than $10 million as in the case of Showpla, there is actually no hope in hell shareholders will get anything," said a market-watcher. In that case, any payout is a bonus since creditors get first bite at the sales proceeds. In response to queries by The Straits Times, white knight Royal Sporting House -- which operates more than 640 standalone stores and shops-in-shop in Singapore, Malaysia, the United Arab Emirates, the Philippines and Brunei -- confirmed its interest in Showpla. "The RSH Group is embarking on the reverse takeover of Showpla Asia and there are several approvals that are being sought. We are in the process of obtaining these approvals," a spokesman said. It did not, however, say why it was eyeing the troubled company. However, previous reports have said that Royal Sporting House wants to go public, and some in the industry have speculated that in taking the reverse takeover route, it may be hoping for a quicker listing process. The sports retailer will delist Showpla shares and issue its own shares to Showpla shareholders. It will then apply for a listing. A shareholders' meeting, first scheduled for Aug 3, and later changed to Aug 17, is understood to have been postponed yet again to give Showpla shareholders more time to study the scheme of arrangement. Before the deal can go through, 90 per cent of those present and voting must be in favour. Court and creditor approval is also required. Showpla sowed the seeds of its own destruction in 1996 when it expanded too quickly. When the regional economic crisis struck, it found itself weighed down by cashflow problems as it faced a mismatch of short-term funding and long-term commitments. In August 1998, Showpla's Japan-based parent company had also filed for court protection --throwing into doubt the recoverability of $20 million in loans extended by the Singapore group to its parent. (The Straits Times 14-Aug- 2000) =============== T H A I L A N D =============== KRUNG THAI BANK: To transfer Bt66M of bad loans to AMC ------------------------------------------------------ Krung Thai Bank directors will set up a new asset management company to oversee 66 billion baht in bad loans now being restructured in-house. The money is separate from the 537 billion baht in bad loans already scheduled to be transferred to Sukhumvit Asset Management Co, a new firm owned by the Financial Institutions Development Fund. The transfer of most bad loans from the state bank is scheduled to be completed in the next few months, reducing problem loans to 16% from 40% of outstanding loans. By transferring remaining bad loans to a second asset management firm, non-performing loans at the parent bank will fall to no more than 5% of outstanding loans. The proposal, approved at a board meeting in June, envisions the bank holding less than a majority stake in the new management firm, to avoid the need to consolidate accounts and set aside loan-loss reserves for the transferred assets. Krung Thai chairman Sivawong Changkasiri assigned Dusit Tengniyom, senior executive vice-president and head of the asset management division, to study the plan. "The bank has been approached by many institutions interested in buying up distressed loans or entering an asset management venture. There shouldn't be any problems in finding a partner for the new company," one board member said. Under a compromise approved by the cabinet this year, KTB would transfer 108 billion baht of its own bad loans and about 240 billion baht in bad loans inherited from the merger with First Bangkok City Bank to Sukhumvit AMC. Sukhumvit AMC would also receive capital of 108 billion baht from Krung Thai Bank, funds previously injected into the bank by the development fund. Assets would be transferred for government bonds paying yields equal to deposit costs plus some expenses, helping compensate the bank for losses on the bad loans. Once the transfer is complete, the loan book would fall to 397 billion baht, with problem loans of 66 billion. Provision coverage would be 100%. Bank executives say one sticking point in setting up a second asset management firm will be determining an appropriate transfer price. The Finance Ministry, which controls over 90% of Krung Thai, is reluctant to accept further losses. But selling assets to the new management firm at full price would only complicate restructuring efforts in the future. Another obstacle is how to staff the new company. Krung Thai's asset management division has 800 staff but many are expected to resist transfer as they would likely lose their status and benefits as state employees. (Bangkok Post 15- Aug-2000) THAI AIRWAYS INT'L: Posts larger Q3 loss than expected ------------------------------------------------------ Thai Airways International Pcl, Asia's sixth-largest airline, lost more than expected in the third quarter as its fuel bill tripled and a weaker baht increased the cost of servicing foreign debt. Thailand's national carrier lost 1.17 billion baht ($29 million) in the April-June period, from a revised net income of 2.56 billion baht in the same period last year. Five analysts surveyed by Bloomberg forecast a net loss of 754 million baht. Thai Air is being hurt more by higher fuel prices than Asian rivals such as Cathay Pacific Airways and Singapore Airlines Ltd. because it doesn't use hedging, the practice of locking in future fuel purchases to dampen price swings. The average price of jet fuel rose 58 percent in the quarter from the same period last year. "The direction of earnings is not clear" as Thai Air is exposed to currency and fuel price fluctuations, said Chin Lim, an aviation analyst at Morgan Stanley Dean Witter Asia in Singapore, who has a "neutral" rating on the stock. Fuel costs in the April-June period more than tripled to 5.44 billion baht, said Amnuay Chanya, Thai Air's executive vice president, in a statement to the Stock Exchange of Thailand. Thai Air shares fell to 40.25 baht, down 0.25 baht or 0.6 percent lower for the day. Before today, the stock had lost 28 percent since the beginning of the year, compared with a 34 percent drop in the key SET index. The loss was further compounded by a foreign exchange loss of 3.6 billion baht in the quarter as the baht weakened by 3.4 percent in the period from the year-earlier quarter. The baht's slump magnified Thai Air's foreign debt in local currency and increased the cost of servicing repayments. By comparison, Thai Air had a foreign exchange gain of 2.1 billion baht in the same period a year earlier. The company didn't disclose the size of its foreign debt. The loss comes at a time when the national carrier is planning a share sale. The airline plans to raise about 14.8 billion baht by selling a 13 percent stake to local investors and another 10 percent stake, possibly to a foreign carrier. The sale has been postponed to November from a previously scheduled sale in the July-September period. Morgan Stanley's Chin said the share sale will probably be further delayed as Thailand has not developed its new airport which could help make the carrier a more attractive investment. Tourism is Thailand's biggest foreign currency earner. Thai Air didn't benefit from the surge in travel as much as other Asian airlines in the region because of an earlier- than- expected arrival of the rainy season in Thailand. The rains started in April rather than the usual late June or early July. For the quarter, passenger travel accounted for 70 percent of operating revenue while freight contributed 17 percent. Flight operating expenses rose 51 percent to 5.5 billion baht, as fuel costs surged, increasing total operating costs by 17 percent on year to 26 billion baht. Pretax sales from freight rose 10 percent to 4.9 billion baht, while pretax sales from passenger traffic gained 18 percent to 20.5 billion baht. The airline earned net income 8.6 billion baht in the first three quarters, 24 percent less than for the same period a year ago. Still, the airline looks on track to meet the average full- year profit of 9.16 billion baht expected by 13 analysts surveyed by Ibes International Inc. Pretax sales from freight rose 11 percent for the first nine months to 14.4 trillion baht, while pretax sales from passenger traffic rose 12 percent to 62.6 billion baht. In the nine-month period, Thai Air's operating revenue rose 12 percent to 88.9 billion baht while operating costs rose a faster 16 percent to 77.9 billion baht. (Bloomberg 15- Aug-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. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. *** End of Transmission ***