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/raid1/www/Hosts/bankrupt/TCRAP_Public/980826.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 26, 1998, Vol. 1, No. 130 Headlines C H I N A & H O N G K O N G CLIMAX INTERNATIONAL: Deloitte Touche Disclaims Opinion CLIMAX INTERNATIONAL: Seeks Ex-chief Over Missing Millions CLIMAX INTERNATIONAL: United Pacific Writes-Off Equity Stake CULTURECOM HOLDINGS: Sing Tao Writes-Off Equity Interest ETERNITY PROPERTY: Winding-Up Petition IWAI'S INTERNATIONAL: Auditors Express Going Concern Doubt MEGALITE TRADING: Winding-Up Petition MUSICAL CONCEPTS: Winding-Up Petition PRICERITE GROUP: Creditor Action Increases Pricerite Losses RHINE HOLDINGS: Reports Extent of Financial Disarray TAK WING: Will Meet with Bankers on August 26 YEE HING: Winding-Up Petition I N D O N E S I A PT BANK DAGANG: Government Shutters Three Private Banks PT BANK MODERN: Government Shutters Three Private Banks PT BANK UMUM: Government Shutters Three Private Banks J A P A N LONG TERM: Some Bad Loan Data Divulged NIPPON LEASING: Seeking 224.3 Billion Yen Debt Forgiveness YAHAGI CORP.: Stock Falls Sharply on Financial Health Concerns K O R E A BUIL TELECOMMUNICATION: Selected as Workout Target DONG AH: Construction Concern to Get US$123 Million Fresh Loans HAITAI CONFECTIONERY : Equity for Debt Swap Completed HANCHANG COMPANY: Company Selected as Workout Target M A L A Y S I A ARAB-MALAYSIAN: Finance Company Considering Sale of Bad Loans T H A I L A N D BANGKOK METROPOLITAN: BOT Invites Financial Advisors to Apply KCE ELECTRONICS: Shares Crash in Trading on News of Losses KRISDAMAHANAKORN PLC: SET Says Financial Statements Inadequate PRANDA JEWELRY: SET Says Financial Statements Inadequate PRANDA JEWELRY: Chairman Responds to Interview with The Nation QUALITY HOUSES: SET Says Financial Statements Inadequate RENOWN LEATHERWARES: SET Says Financial Statements Inadequate SIAM CEMENT: Computer Display Plant Funded by Mitsubishi SIAM CITY BANK: BOT Invites Financial Advisors to Apply THAI OLEFINS: Chevron Looking to Take Stake in Troubled Situation ================================= C H I N A & H O N G K O N G ================================= CLIMAX INTERNATIONAL: Deloitte Touche Disclaims Opinion ------------------------------------------------------- Deloitte Touche Tohmatsu disclaims its opinion on the financial statements published by Climax International Company Limited and its subsidiaries for the year ended 31 March 1998. Deloitte questions: 1. the validity of certain unsupported amendments to the data input underlying the valuation of stocks and work in progress of the Group as at 31 March 1997; and 2. The appropriateness of the provision of approximately HK$31,203,000 made in respect of certain unsubstantiated cheque payments made payable to cash during the year. Further, Deloitte questions Climax's ability to continue as a going concern in view of Climax's dependency on the debt restructuring and refinancing proposals or additional equity funding. CLIMAX INTERNATIONAL: Seeks Ex-chief Over Missing Millions ---------------------------------------------------------- According to a report published in the South China Morning Post, the former chairman of stationery maker Climax International, Kenneth Fung Kin-yuen who stepped down in April, is being sought by the company to help their investigation into irregularities in its balance sheet, which include an overvaluation of semi- finished products by HK$88.49 million, HK$48.25 million in non- existent transactions and HK$31.2 million worth of questionable checks. A committee comprising Climax board of directors is looking into the matter. As a result of the irregularities, the company had to restate its 1997 year-end financial statements in March. The company, which is 29.3 percent owned by United Pacific Industries (UPI), posted a HK$480.12 million attributable loss in the year to last March compared with HK$74.94 million in the previous year. Climax chief financial officer said that on the surface it appears human error gave rise to the unsubstantiated transactions, but the ultimate reasons are being investigated. Climax chief executive officer Simon Hsu Nai-cheng who is also UPI managing director said that further action might be taken. Climax's former auditor Arthur Anderson resigned in June under mysterious circumstances and was replaced by Deloitte Touche Tohmatsu, which made a disclaimer on Climax's accounts, primarily due to the limited evidence available for auditing. According to the Hong Kong Standard, Mr Hsu said that the findings of the company's task force for the matter would be made public. He said that Climax would have to clarify the issue with the stock exchange which has taken an interest in the issue. The company and its 26 banks executed an agreement in June to suspend repayment of about $600 million in outstanding debts until the end of September. They are now working on a permanent refinancing proposal for Climax. CLIMAX INTERNATIONAL: United Pacific Writes-Off Equity Stake ------------------------------------------------------------ United Pacific Industries Limited, in connection with announcing its fourth-quarter earnings, recalled that, in June 1998, Climax International Company Limited and its subsidiaries reached a standstill agreement with the bankers of the Climax Group. Because of the material amount of loss reported by Climax for the year ended 31st March, 1998 and the Climax Group's dependence on the successful implementation of debt restructuring and refinancing proposals, United Pacific disclosed that it has made a full provision for the cost of its investment in the listed shares of Climax of HK$120,929,000 in its year-end financial statements. CULTURECOM HOLDINGS: Sing Tao Writes-Off Equity Interest -------------------------------------------------------- In announcing its operating results for the year ending March 31, 1998, Sing Tao Holdings Limited discloses that its directors deem it appropriate to write down its HK$99,444,000 investement in Culturecom Holdings Limited by HK$81,470,000. ETERNITY PROPERTY: Winding-Up Petition -------------------------------------- A petition for the winding up of ETERNITY PROPERTY AGENCY COMPANY LIMITED was presented to the High Court on August 11 by Lo Kwok Kin of 4th Floor, 15A Sun Chuen Street, Tai Hang, Hong Kong, and that the said petition is directed to be heard before the court at 9:30 am on Sept. 16, and any creditor or contributory of the said company desirous to support or oppose the making of an order on the said petition may appear at the time of hearing by himself or his counsel for that purpose, and a copy of the petition will be furnished to any creditor or contributory of the said company requiring the same by Tam Lee Po Lin, Nina for Director of Legal Aid, 27th Floor, Queensway's Government Offices, 66 Queensway, Hong Kong on payment of the regulated charges for the same. IWAI'S INTERNATIONAL: Auditors Express Going Concern Doubt ---------------------------------------------------------- Iwai's International Holdings Limited announced its results of operations for the year ending March 31, 1998: Current Period from 1/4/97 to 31/3/98 ('000 HK$) Turnover/Interest Income : 73,251 Profit-Continuing Operations - Operating Profit/(Loss) : (78,921) - Exceptional Items : (5,216) - Discontinued Operations : N/A Total Operating Profit/(Loss) : (84,137) Share of Profit/(Loss) of Associated Companies : N/A Profit/(Loss) after Tax & MI : (84,137) Iwai's auditors expressed fundamental uncertainty relating to the going concern basis to emphasis that the Group depends on the continuing financial support provided by Heng Fung Holdings Company Limited ("Heng Fung"), a substantial shareholder of the Company since 17th July 1997. The directors are satisfied that the Group will be able to meet its financial obligations as they fall due provided that Heng Fung continues to provide financial support to the Group. The financial statements have been prepared on a going concern basis, the validity of which depends upon future funding being available. The financial statements do not include any adjustments that would result from a failure to obtain such funding. The auditors consider that appropriate disclosures have been made and their opinion is not qualified in this respect. MEGALITE TRADING: Winding-Up Petition ------------------------------------- A petition for the winding up of MEGALITE TRADING LIMITED was presented to the High Court on August 11 by Chan Suk Ying of Room 1616, Block 6, Kwai Shing Estate, Kwai Chung, New Territories, and that the said petition is directed to be heard before the court at 9:30 am on Sept.6, and any creditor or contributory of the said company desirous to support or oppose the making of an order on the said petition may appear at the time of hearing by himself or his counsel for that purpose, and a copy of the petition will be furnished to any creditor or contributory of the said company requiring the same by Tam Lee Po Lin, Nina for Director of Legal Aid, 27th Floor, Queensway's Government Offices, 66 Queensway, Hong Kong on payment of the regulated charges for the same. MUSICAL CONCEPTS: Winding-Up Petition ------------------------------------- A petition for the winding up of MUSICAL CONCEPTS LIMITED was presented to the High Court on August 5 by Wong Chor Heung of Room 1603, Hin Fu House, Hin Keng Estate, Shatin, New Territories, and that the said petition is directed to be heard before the court at 9:30 am on Sept. 16, and any creditor or contributory of the said company desirous to support or oppose the making of an order on the said petition may appear at the time of hearing by himself or his counsel for that purpose, and a copy of the petition will be furnished to any creditor or contributory of the said company requiring the same by Tam Lee Po Lin, Nina for Director of Legal Aid, 27th Floor, Queensway's Government Offices, 66 Queensway, Hong Kong on payment of the regulated charges for the same. PRICERITE GROUP: Creditor Action Increases Pricerite Losses ----------------------------------------------------------- The Asian Wall Street Journal reported that over half of the HK$15.8 million (US$2 million) loss the Pricerite Group Ltd. reported for the year ending March 31 was attributable to a loss of HK9.1 million from the discontinuation of the operations of its real-estate subsidiary, ABC Properties, Ltd. A creditor foreclosed on this subsidiary in 1997 after it failed to repay its debts. During the previous year, Pricerite posted a net profit of HK$5.5 million. The house-hold-goods retailing company also did not pay a dividend either this year or last year. RHINE HOLDINGS: Reports Extent of Financial Disarray ---------------------------------------------------- Rhine Holdings Limited announced Monday that Wang Ming Qiang, the Company's chairman and managing director, without the authority of the board of directors of the Company, has mortgaged certain property of the Rhine Group and procured a guarantee be given by the Rhine Group, not for the benefit of the Rhine Group but for the benefit of Ningbo Dili Group Co. Ltd., an independent private enterprise in China, of which Mr. Wang is the president and owns 30%). Legal proceedings in the People's Republic of China have been commenced by parties not related to the Company and the Rhine Group against a subsidiary of the Rhine Group under such mortgage. The Company is now seeking legal advice for taking appropriate legal actions against Mr. Wang. The Company and Rhine Jewellery Limited are under a winding up petition with the Hong Kong Court of First Instance by syndicate banks. The hearing of such petition is fixed to be held on 26 August 1998. The Rhine Group is barely managing to survive operationally and in the absence of a significant working capital injection from outside investors, there is considerable doubt as to whether the Rhine Group may continue as a going concern. The Company is discussing with the majority Swiss Franc/US Dollar dual currency convertible noteholders with a view to resolve financial difficulties of the Company and restructuring its debts. A. Liheng Investment (Shanghai) Company Limited, a wholly- owned subsidiary of the Company, is the foreign investor of a joint venture in Shanghai, Shanghai Laixing Real Estate Development Company Limited which is owned as to 70% by the Company. B. The main assets of Shanghai Laixing are the Laixing Garden and the Rhine Plaza in Shanghai. Rhine Plaza is comprised of ten floors of retail space and seventeen floors of office units. The unaudited construction cost of work in progress as at 31st December, 1997 was approximately HK$234 million. The Rhine Plaza is currently 75% complete. Shanghai Laixing is seeking further financing in the PRC to complete the construction works. C. Ningbo Dili has advanced an unsecured non-interest bearing loans of HK$25.4 million to the Company between February and May 1998. The board of directors of the Company has collected evidence which shows that Mr. Wang signed, (i) not being a director or employee of Liheng and without authorisation from the Company and Liheng, purportedly on behalf of Liheng, an undertaking by Liheng dated 25 April 1998 in favour of Shanghai Laixing to guarantee the performance of Ningbo Dili's obligations under two contracts between Ningbo Dili and a company in Xiamen, an independent third party, and provide all the 70% equity interests held by Liheng in Shanghai Laixing, which is Liheng's sole asset, as security for the performance of Ningbo Dili's obligations. The Xiamen Contracts are not for the interest of the Rhine Group. The directors of the Company understand that Ningbo Dili is not a connected person of the Company as defined in the Listing Rules. (ii) as managing director of and on behalf of Shanghai Laixing, a mortgage dated 29 April 1998 in favour of the Xiamen Company in respect of two floors out of a total of seventeen floors of the Rhine Plaza in Shanghai under development of Shanghai Laixing, as securities for the performance of Ningbo Dili's obligations under the Xiamen Contracts. Neither the Company nor Shanghai Laixing has authorised such mortgage or Mr. Wang to sign such mortgage; and (iii) without authorisation from the Company and Liheng and purportedly on behalf of Liheng, an undertaking dated 29 April 1998 in favour of Shanghai Laixing's PRC investor to guarantee Ningbo Dili's performance of its certain obligations under a counter-guarantee dated 27 April 1998 between Ningbo Dili and Shanghai Laixing under which Ningbo Dili guaranteed to perform its obligations under one of the Xiamen Contracts and provide a sum of RMB20,000,000 to Shanghai Laixing as security in case of enforcement by the Xiamen Company under the Mortgage Agreement. The Company has been notified by Shanghai Laixing on 30 June 1998 that the Xiamen Company commenced legal proceedings in the PRC on 18 June 1998 to claim against both Ningbo Dili under the Xiamen Contracts and Shanghai Laixing under the Mortgage Agreement a total sum of RMB55,080,000 for the alleged failure of Ningbo Dili to perform its obligations under the Xiamen contracts, and obtained a court order dated 26 June 1998 to freeze the respective assets of Ningbo Dili and Shanghai Laixing up to the sum of RMB6,480,000. Shanghai Laixing is now seeking legal advice as to the appropriate actions to be taken. The Company has been notified by Shanghai Laixing on 27 June 1998 that a PRC court order dated 21 July 1998 to freeze 4,000 sq.m. of Rhine Plaza for an alleged dispute between Shanghai Laixing and a Chinese entity. Shanghai Laixing is now seeking legal advice as to the appropriate actions to be taken. The Company has also been notified by Shanghai Laixing on 27 July 1998 that The Duty Free Commodity Corporation Xiamen Special Economic Zone and DutyFree commenced legal roceedings in the PRC on 2 July 1998 to claim against both Ningbo Dili and Shanghai Laixing under the Mortgage Agreement a total sum of MB14,300,016 for the alleged failure of Ningbo Dili to perform its obligations and obtained a court order dated 22 July 1998 to freeze the respective assets of Ningbo Dili and Shanghai Laixing up to the sum of RMB14,300,016. Shanghai Laixing is now seeking legal advice as to the appropriate actions to be taken. The directors of the Company (excluding Mr. Wang Dong Yong Chi, Liu Jun Yang, Li Da Zheng and Yu Rong Fang who are outside Hong Kong and cannot be contacted repeatedly since late July 1998) consider that none of the Xiamen Contracts, the Mortgage Agreement and the two undertakings for the purpose to fulfill the non-performance of Ningbo Dili referred to in paragraphs (i) & (iii) above are for the benefit of the Rhine Group. A letter was sent to Mr. Wang by the Company through its solicitors on 17 June 1998 complaining about the execution of the Mortgage Agreement. The Company has been seeking legal advice as to the appropriate actions to be taken against Mr. Wang and will make a further announcement of such legal actions and the development of the PRC legal proceedings as and when appropriate. The Company is assessing the impact of the mortgage of the property under the Mortgage Agreement and the PRC legal proceedings commenced by the Xiamen Company, on its daily operation and financial position. The Company's legal representatives are seeking consent from PRC courts to release the relevant detailed documents under the Mortgage Agreement (which did not stipulate any figures in the original agreement) to determine Rhine Group's liability. Further announcements of any such effects and changes will made by the Company as and when appropriate. The Company is working with the Auditors, Messrs. Ernst & Young to finalize the final results for the year ended 31 December 1997. The delay is due to the full board of directors being unable to convene a meeting with the Auditors to finalize the corresponding audited figures. As at 21 August 1998 the Company is unable to disclose its current financial position because of the unexpected foregoing delay. A separate announcement will be made when the date for the board meeting is finalised and when the release of the final results can be made. The Rhine Group is barely managing to survive operationally and in the absence of a significant working capital injection from outside investors, shareholders should note that there will be considerable doubt as to whether the Rhine Group may continue as a going concern. The Company is discussing with the majority Swiss Franc/US Dollar dual currency convertible noteholders for HK$157 million due on 31 December 1998 with a view to resolving the financial difficulties in repaying to the syndicate banks an unsecured loan in the sum of HK$6,294, 932 and to restructuring its debt. However, it should be noted that such discussion may or may not be concluded and at present no legally binding agreement has been entered into by the Company and the Major Note Holders. Trading in the shares of the Company listed on the Stock Exchange has been suspended since 10 July 1998. Suspension remains until further notice. TAK WING: Will Meet with Bankers on August 26 --------------------------------------------- Tak Wing Investment (Holdings) Limited disclosed that KPMG Peat Marwick, the independent accountant of the Company has been requested to update their review on the financial position of the Group. The results of the work performed by KPMG and REXCAPITAL (Hong Kong) Limited, the financial adviser of the Company, are expected to be presented to the banks of the Group at a bankers' meeting to be held on 26 August 1998. YEE HING: Winding-Up Petition ----------------------------- A petition for the winding up of YEE HING CHEUNG DYEING FACTORY LIMITED was presented to the High Court on August 13 by Wong Chi Yin of 7th Floor, Kwong Fat Bldg., 254L, Sha Tsui Road, Tsuen Wan, New Territories, and that the said petition is directed to be heard before the court at 9:30 am on Sept. 16, and any creditor or contributory of the said company desirous to support or oppose the making of an order on the said petition may appear at the time of hearing by himself or his counsel for that purpose, and a copy of the petition will be furnished to any creditor or contributory of the said company requiring the same by Tam Lee Po Lin, Nina for Director of Legal Aid, 27th Floor, Queensway's Government Offices, 66 Queensway, Hong Kong on payment of the regulated charges for the same. ================= I N D O N E S I A ================= PT BANK DAGANG: Government Shutters Three Private Banks ------------------------------------------------------- The Indonesian government announced a major bank restructuring effort that included freezing the operation of three of the country's private banks, including PT Bank Dagang Nasional Indonesia. The banks, which had been taken over by the Indonesia Bank Restructuring Agency (IBRA), were declared technically insolvent earlier in August. PT BANK MODERN: Government Shutters Three Private Banks ------------------------------------------------------- The Indonesian government announced a major bank restructuring effort that included freezing the operation of three of the country's private banks, including PT Bank Modern. The banks, which had been taken over by the Indonesia Bank Restructuring Agency (IBRA), were declared technically insolvent earlier in August. PT BANK UMUM: Government Shutters Three Private Banks ----------------------------------------------------- The Indonesian government announced a major bank restructuring effort that included freezing the operation of three of the country's private banks, including PT Bank Umum Nasional. The banks, which had been taken over by the Indonesia Bank Restructuring Agency (IBRA), were declared technically insolvent earlier in August. ========= J A P A N ========= LONG TERM: Some Bad Loan Data Divulged -------------------------------------- The Long-Term Credit Bank of Japan and the Financial Supervisory Agency have decided to divulge LTCB's self-assessed bad loans, LTCB officials said Tuesday. LTCB revealed Tuesday that it had 2,824 billion yen in broadly defined bad loans at the end of fiscal 1997 on March 31. LTCB made the revelation in a report on its loans submitted to the House of Representatives ad hoc committee on financial system stabilization. Copies of the document, given to reporters by a member of the committee, showed: 15,911.4 billion yen in type-1 healthy loans; 2,379.6 billion yen in so-called type-2 loans requiring monitoring; and 444.4 billion yen in type-3 loans likely to go bad. Type-4 loans are those deemed uncollectible, and are already covered by loan-loss reserves reported in bank financial statements. Bank loans are classified in accordance with a four- category loan classification formula established by the FSA. LTCB reportedly decided to make this disclosure of more-than-one- year-old data because the opposition party in parliament has criticized using public funds, saying the bank's financial position is too ambiguous to warrant the use of public money. This is "like being able to write your own report card. Are you going to take a bunch of 'D's home to your mother?" said James McGinnis of Dresdner Kleinwort Benson, commenting on the notion of self-assessment, in an interview with Reuters. McGinnis told Reuters that while the amount of LTCB's problem loans did not seem too far out of line, it would be easy for the bank to misclassify loans and some loans could be riskier than reported. The parliamentary committee agreed Monday to demand LTCB and the Financial Supervisory Agency disclose current data about the size of the bad loans outstanding at the bank, the Asahi Shimbun and the Nihon Keizai Shimbun said. LTCB is required to dislose its total non-performing loans, including grey debts the bank has not so far announced, but the names of the borrowers are unlikely to be revealed, the Asahi said. The bank said its bad loans were 1,378.5 billion yen (9.7 billion dollars) at the end of last March. But analysts said the amount could top 2,000 billion yen if risky loans were included as well as loans held by the bank's affiliates. Conflicting reports said that the FSA would not, in fact, disclose the results of its ongoing inspections of the books of 19 major Japanese banks, including the LTCB, according to reports quoting the head of the FSA Tuesday afternoon. "It is inappropriate for the financial supervisory authority to disclose management conditions of private firms, and we, as civil servants, should not disclose information obtained in the process of doing our duty," FSA Commissioner Masaharu Hino told a regular press conference. The FSA reported last month that broadly defined bad loans, on average, account for 11% of all credits extended by the 19 major commercial banks. However, the ratio at LTCB is as high as 15%. Finance Minister Kiichi Miyazawa indicated yesterday that the results of the FSA's inspection of LTCB's books "should be unveiled some day, when its disclosure will not have a big impact on the global financial system. I think the time for the disclosure will not come before the merger of LTCB and Sumitomo Trust." News reports speculated yesterday that the agency may release the results of its LTCB inspection after there is more progress in the LTCB-Sumitomo merger talks in an effort to convince the opposition to agree to enact a set of six financial stabilization bills, political sources indicated yesterday. Among the six bills are: A. two proposed by the government, including: * one covering the formation of bridge banks to ensure customers of failed lenders have continuing access to credit, and B. four proffered by the ruling Liberal Democratic Party: * one of which would lift the ban on private companies engaging in the collection of debts to failed concerns. The opposition party, however, is demanding the FSA divulge the results of its own examination of the LTCB loan portfolio, following the Diet submission of the LTCB's self-assessment. * * * Prime Minister Keizo Obuchi Tuesday defended the government- backed rescue plan for LTCB Tuesday against scathing criticism by opposition parties. Obuchi said yesterday that the decision to bail out LTCB would avert a financial depression. "We cannot trigger a financial depression originating in Japan," the premier told parliament's lower house budget committee. The use of taxpayers' money to keep the bank afloat "was not solely for rescuing the LTCB," he said. Eijiro Hata, a senior politician in the main opposition Democratic Party, said the government hadn't proved that LTCB wasn't bankrupt, and it was therefore improper to spend government money on it. "The government needs to clearly explain to the public why LTCB needs public money," he said, accusing the government of trying to prop up bankrupt banks with public funds. Obuchi told Parliament that LTCB's internal assessment was that its debts didn't exceed assets as of the fiscal year-end last March 31, and that a Bank of Japan study hadn't found it was insolvent either. He also said the public funds for LTCB weren't intended to help an individual bank or protect it against bankruptcy, but to preserve the stability of the overall financial system. But Finance Minister Kiichi Miyazawa shrugged off their complaints yesterday and insisted the rescue funds could be used whenever a bank was faced with falling capital. "There are many cases in which a bank's capital declines excessively and a bad loan write-off is not the only such case," he told the budget committee. Hata also criticized the government's package of bills to clean up Japan's debt-laden banking system, under which the recently created Financial Supervisory Agency would play a major role. Hata said the clean-up scheme didn't include sufficient disclosure of banks' bad debts, and that the FSA wasn't willing to improve disclosure. Another, independent body needs to be created to run the clean-up scheme, Hata said. Obuchi argued that quick passage of the banking bills were necessary for financial stability and the economy, and promised to listen to opposition complaints. * * * Furthermore, in a report to the Budget Committee of the lower house, LTCB said it has paid 4,306 million yen in retirement bonuses to 35 board members over the past six years, or 120 million yen per person. A senior executive of the ruling LDP urged retired top executives of LTCB to return their retirement allowances. LDP General Council Chairman Takashi Fukaya said at a news conference yesterday that it is immoral that LTCB, which is set to receive huge public funds, provided its outgoing executives with huge allowances. * * * In trading Tuesday, shares in LTCB (8303 JP) dipped 3 yen to 57 according to Bloomberg. * * * Amid all the political rhetoric, Richard Koo, chief economist at Nomura Research Institute, once a strong critic of Tokyo's policies but now seen in some quarters as a supporter for new measures to fight Japan's financial crisis, weighed-in supported non-disclosure of bad loans, according to UPI press reports. Koo told journalists that Japan is facing a "systemic banking crisis" similar to that faced by the United States from 1991 to 1993, and that the government is right to tread carefully with information. The private economist added, "I think a little more disclosure might be useful, but even in the United States, bank examiners don't tell the public everything they know, particularly when you have a systemic crisis." Speaking at the Foreign Correspondents' Club of Japan, Koo said in order to prevent a collapse in a systemic banking crisis bank inspectors "have to be discreet at some point." He added that it is critical that the United States realize that a higher yen is vital to overcoming Japan's current banking crisis. Koo said the situation could be likened to the crisis faced by the world with the great depression in the late 1920s and early 30s. Koo said that Japan desperately need more qualified bank inspectors, noting that while the United States has about 11,000 inspectors, Japan has only 600. NIPPON LEASING: Seeking 224.3 Billion Yen Debt Forgiveness ---------------------------------------------------------- Kyodo News reported yesterday that, according to a report published in The Mainichi Newspapers, Nippon Leasing seeks forgiveness of 224.3 billion yen in debt. No further details were available at press time. YAHAGI CORP.: Stock Falls Sharply on Financial Health Concerns -------------------------------------------------------------- Yahagi Corp. (5544 JP ) fell as much as 17 yen to 23 amid concern about the company's financial health. The company said its financial conditions are being inspected by the major stock exchange authorities and it believes the stock will be reinstated to the first section of the exchange. (Bloomberg L.P. 25-Aug- 1998) ========= K O R E A ========= BUIL TELECOMMUNICATION: Selected as Workout Target -------------------------------------------------- According to the Korean Language Mail Kyungje, the Buil Telecommunications Company has been selected by its main creditor, the Pusan Bank, as a candidate for a Work-out program. DONG AH: Construction Concern to Get US$123 Million Fresh Loans --------------------------------------------------------------- Fresh loans amountig to 160 billion won (US$123 million) will be extended to Dong Ah Construction (KSE:00280) to support the troubled builder's workout, banking sources said Tuesday, according to a Yonhap news report. The new loans will bring to 1.12 trillion won the total rescue lending extended to Dong Ah so far this year, including 220 billion won made out in January, 140 billion in April and 600 billion won in May. Under the workout mapped out by Dong Ah's main creditor Seoul bank (KSE:02860), about 80 billion won in loan will be converted into equity, and a grace period of up to 2002 will be provided for repayment of existing loans amounting to 4.6 trillion won. The workout plan will be finalized in a meeting of credtor bank representatives on Aug. 31. Dong Ah's workout program is expected to set a precedent for other conglomerates. Korea Express (KSE:00120), an affliate of Dong Ah Group, will be merged with Dong Ah Construction; fresh lending support of 160 billion won will be in the pipeline for Korea Express until the merger takes place. With the grace for the debts payment, interest payment will be deferred until end of August next year and interest rate will be lowered to the prime rate. HAITAI CONFECTIONERY : Equity for Debt Swap Completed ----------------------------------------------------- The Korea Herald reported that the Haitai Confectionery Company appears likely to survive, now that creditors (including Cho Hung Bank) have agreed to convert up to 800 billion won ($610 million) of their loans into equity. Industry sources cited in this report state that when the loans are converted into equity, Haitai Confectionery will secure base to normalize its business. It now appears that plans to sell Haitai to foreigners have now been abandoned. Haitai Confectionery was included on the June 19 list of 55 nonviable firms that were subject to immediate liquidation as creditor banks are to stop providing them with new loans. This list was generated at the request of the Financial Supervisory Commission by the nation's 26 commercial banks which classified their business loan-clients into three groups -- normal, viable, and nonviable. HANCHANG COMPANY: Company Selected as Workout Target ---------------------------------------------------- According to the Korean Language Mail Kyungje, the Hanchang Company has been selected by its main creditor, the Pusan Bank, as a candidate for a Work-out program. The Hanchang Company is located at 1361-9 Yeunsan-dong, Yeunje-gu, Pusan, Korea. =============== M A L A Y S I A =============== ARAB-MALAYSIAN: Finance Company Considering Sale of Bad Loans ------------------------------------------------------------- Arab-Malaysian Finance Bhd (AMF), Malaysia's third largest finance company, is considering selling bad corporate loans to the government-backed agency set up to clean up bad debt at the country's financial institutions. "We're exploring it; it is an option we're looking at and we won't say no," AMF's managing director Mohamed Azmi Mahmood told reporters after the company's annual meeting with shareholders, according to reports circulated by Bloomberg and The Business Times. AMF has corporate loans totalling three billion Malaysian ringgit (S$1.3 billion), or 20 per cent of total loans, he said. He did not say how much of the RM3 billion is considered non-performing. Finance companies typically offer home and car loans to borrowers while banks can offer customers a wider range of banking services, Bloomberg and BT explained. AMF is reportedly the first company to publicly express its interest in selling bad loans to the agency, known as Pengurusan Danaharta Nasional Bhd. The move comes as Malaysia hurtles towards its first recession in 13 years, sparking a surge in bad loans at banks and finance companies. AMF, the finance arm of AMMB Holdings Bhd, said on June 26 that profits plunged 86 per cent to RM35.1 million for the year ended March 31. As of June, non-performing loans is "lower" than the industry average of 14.1 per cent of total loans, Mr Mohamed said. =============== T H A I L A N D =============== BANGKOK METROPOLITAN: BOT Invites Financial Advisors to Apply ------------------------------------------------------------- The Nation reports that the Bank of Thailand has invited financial institutions interested in advising Siam City Bank and Bangkok Metropolitan Bank on their privatisations to submit their proposals by Sept 1. The BOT will reportedly limit the task to companies with experience in advising or assisting entire or partial acquisitions of financial institutions. They are also required to have overseas networks. Vichai Punpocha, general manager of Dresdner Bank AG in Thailand, said his bank's subsidiary Dresdner Kleinwort Benson (Asia) is interested in bidding for the contract. KCE ELECTRONICS: Shares Crash in Trading on News of Losses ---------------------------------------------------------- Shares of KCE Electronics have crashed in recent days from 71 baht on Friday morning to 35 baht this week, as investors dumped shares following the release of the company's first-half financial report. In the second quarter, the company posted a loss of 356.53 million baht, a loss of 14.25 baht per share. For the first half, profits were 4.067 million baht, a sharp fall from the 167.87 million posted in the same period of 1997. One analyst interviewed by the Bangkok Post said the heavy selling in recent days likely stemmed from foreign shareholders, who control 49% of KCE Electronics through custodians such as Chase Nominees, HSBC (Singapore) and Daiwa Bank. The company, a producer of printed circuit boards, integrated circuits and other electronic components, was founded by the Ongkosit family, the Post reported KCE Electronics said much of its second quarter losses stemmed from its investments in Avatar Co, a joint venture to build removable cartridge disk drives. The company set up loss provisions of 542 million baht, or 50% of its 48.3% shareholding in Avatar in the second quarter. The firm's auditor, Toemsakdi Krishnamara of Deloitte Touche Tohmatsu Jaiyos, noted in the first-half financial statement that KCE had short-term loans and guarantees over Avatar of 978 million baht, as well as other loan guarantees of 406 million baht. Excluding the losses from Avatar, KCE would have posted investment profits of 187.1 million baht for the first half, or more than double the 70.3 million baht profits posted for the same period in 1997. The failure at Avatar has rebounded back on KCE, both in terms of its direct investment and loans to the subsidiary. Interest payments from Avatar to KCE have been unpaid for the past six months, the Post said. Another analyst interviewed by the Post said the company had clearly misread the market, placing high hopes in the removable drives but ultimately facing losses after its product proved uncompetitive in the world market. Another analyst said KCE's core operations were solid, but that its subsidiary firms had helped drag down overall consolidated results. KRISDAMAHANAKORN PLC: SET Says Financial Statements Inadequate -------------------------------------------------------------- The Stock Exchange of Thailand, referring to reviewed company and consolidated financial statements for the period ending June 30, 1998 filed by Krisdamahanakorn Plc, notes that the Company's auditor expressed a qualified opinion on paragraph g) stating, "Furthermore, the Company has still capitalised interest on hand awaiting development although projects are delayed." According to the Accounting Standard No. 15 "Capitalisation of the borrowing costs", the company shall not capitalise interest on hand awaiting development (for Q2/2541 amount 131 MB and 133 MB in company and consolidated financial statements respectively) during the period that the projects are delayed. Accordingly, the SET notified the company for rectification within 30 days or by September 23, 1998. PRANDA JEWELRY: SET Says Financial Statements Inadequate -------------------------------------------------------- The Stock Exchange of Thailand, Referring to reviewed financial statements for the period ending June 30, 1988 filed by Pranda Jewelry Plc, notes that the Company's auditor expressed a qualified opinion stating, (1) "As at 30th June, 1998, the Company has balances due from overseas customers of approximately Baht 302 million or approximately USD 6.8 million which were overdue for over 1 year up to over 3 years. These accounts have been under a following-up process. The Company has not set up allowance for doubtful accounts against them in full amount yet but only Baht 80 million has been set up. In addition, The Company also has a balance of penalty for overdue payment charged against foreign customers amounting approximately Baht 56 million outstanding as assets. This penalty has not yet been agreed with customers. (The balances of those overseas customers and penalty charges included the effect on foreign exchanges rate, whereby, the Company has recognised an unrealied exchange gain of approximately Baht 115 million from translation of those foreign currency debtors and penalty charges outstanding at the balance sheet date.)" and (2) "As at 30th June, 1998, the Company has balances of trade accounts receivable-associated and related companies which were overdue for over 1 year of approximately Baht 197 million included the unrealised exchange gain of approximately Baht 80 million from the translation of those foreign trade accounts receivable-associated and related companies and has balance of short-term loans and advances to associated and related copanies which were outstanding over 1 year of approximately Baht 78 million. The Company has not set up allowance for doubtful accounts against them in full amount yet but only Baht 0.6 million has been set up." According to the Accounting Standard No.6 "Revenue Recognition" and No.11 "Doubtful accounts and bad debts" the Company shall not recognise revenues when the uncertainty to collectibility exists, and allowance for doubtful accounts must be reserved in material amounts. Accordingly, SET notified the company for rectification within 30 days or by September 20, 1998. PRANDA JEWELRY: Chairman Responds to Interview with The Nation -------------------------------------------------------------- Prida Tiasuwan, Executive Chairman for Pranda Jewelry Pls, issued the following statement in response to an interview earlier this week with The Nation: With reference to my interview given to the Nation, August 24, 1998 under the subject headline Pranda Jewelry to consolidate, seek foreign partner. We would like to evaluate our opinion to the news as below : - 1. In conjection with the company resolution of raising paid - up capital from 150 M� to 240 M� and now in session of joint venture negotiation with 4 - 5 interested foreign investor. Therefore, this motion leads to the said interview of our capital raising plan with prospect foreign investors. 2. In relation to discontinous one of the companys subsidairy, namely PG NETWORK Company Limited whom involves with domestic direct marketing business. The subsidairy company board of directors resulted to discontinous its operation with their views that economic situation in our country has substancially slow down which is sharing my view. In the event of domestic economic turbulance, Pranda Jewelry Public Company Limited shall concentrate on jewelry production for export. This is resulting that on the first six months of 1998, the company has increased its export sales by 234 M� or 50% as its domestic sales declined in proportion. January-June 1998 1997 EXPORT 705 M� 471 M� In the essence of my interview to the issue, I shall bring this agenda to Pranda Jewelry Public Company Limited Board of Directors for their consideration and to inform SET later on. In addition to cost out and discontinuous non-profitable company, I realised that these business thinkings are normally appropriate for any business operation in Thailand. These will result at maintaining the very exiting of the business operation. Please be informed as stated. QUALITY HOUSES: SET Says Financial Statements Inadequate -------------------------------------------------------- The Stock Exchange of Thailand, referring to reviewed consolidated financial statements for the period ending June 30, 1998 filed by Quality Houses Plc, notes that its auditor expressed a qualified opinion on paragraph d) stating "Due to liquidity squeeze, the Company has delayed construction of certain projects. However, the Company has capitalized interest cost on borrowing incurred during the period as the project costs. The interest cost as capitalized during the period of three months and six months then ended amounted to Baht 42.1 million and Baht 83.5 million respectively." According to the Accounting Standard No. 15 "Capitalisation of the borrowing costs", the Company shall not capitalise interest on hand awaiting development during the period that the projects are delayed. Accordingly, the SET notified the company for rectification within 30 days or by September 23, 1998. RENOWN LEATHERWARES: SET Says Financial Statements Inadequate ------------------------------------------------------------- The Stock Exchange of Thailand, referring to reviewed consolidated financial statements for the period ending June 30, 1998 filed by Renown Leatherwears Plc, observes that its auditor expressed a qualified opinion, stating, (a) "LS Holding Co., Ltd. had notes and other receivable, advance and loans to associated and related companies in the form of promissory notes payable at call as of June 30, 1998 amounting to Baht 218.91 million with accrued interest receivable of Baht 44.79 million. These credits were long overdue. Since notes and other receivables, advances, loans and accrued interest were mainly due from related companies, the management believes that full repayment would be made, thus no provision for bad and doubtful debts was made to comply with generally accepted accounting principles." and (b) "In the second quarter of 1998 the company had notes receivable, accrued interest receivable and loans to subsidiary and associated companies for the amounts of Baht 153.44 million, Baht 194.79 million and Baht 664.02 million respectively in the financial statements of the company only and for the amounts of Baht 135.15 million, Baht 133.99 million and Baht 473.67 million respectively in the consolidated financial statements. The company may not get payment from the associated and related companies, yet allowance for doubtful debt was not accounted by the company which is not complied with generally accepted accounting principles." Accordingly, The SET notified the company for rectification within 30 days or by September 20, 1998. SIAM CEMENT: Computer Display Plant Funded by Mitsubishi -------------------------------------------------------- Newsbytes News Network and The Nation report that, with funding support from Mitsubishi Electric Corp. (6503 JP) and Thai financial institutions, Siam Cement Group has successfully wrapped-up project finance for its 6 billion baht ($136.05 million) computer display tube (CDT) project. The project is one of a handful of plans that SCC is going ahead with after announcing the suspension of most of its projects following the July 2 devaluation of the baht last year. Industrial Finance Corp of Thailand's (IFCT) president Anothai Techamontrikul announced Monday that it had approved a 1.2- billion baht ($27.21 million) long-term loan for the CDT project which will have the capacity to produce 1.5 million CDT units per annum. The IFCT loan will represent about a third of the total financing needs of the project. Sources told Newsbytes and The Nation that more than a third of the total financing will come by means of a buyer credit from Mitsubishi Electric Corp., which will supply technology and equipment for the project. The remaining amount will be provided by the Export-Import Bank of Thailand. An IFCT source said that, on the marketing side, the CDT project is considered low risk since it would substitute imports. The local computer monitor industry needs about seven to eight million tubes per year but currently there is only one domestic tube producer, Toshiba Display Devices (Thailand) Co. Ltd., with an annual capacity of only 1.44 million tubes. "Although worldwide demand is slowing down, due to the Asian economic crisis, Thailand still has an insufficient supply [of computer tubes]," the banker said. "And the project should prove to be more competitive than imported products because of its savings on transportation and other costs." Previously, SCC executives said that due to a difficulty in seeking loans and technological support, the company was not certain whether it could go ahead with the project. SIAM CITY BANK: BOT Invites Financial Advisors to Apply ------------------------------------------------------- The Nation reports that the Bank of Thailand has invited financial institutions interested in advising Siam City Bank and Bangkok Metropolitan Bank on their privatisations to submit their proposals by Sept 1. The BOT will reportedly limit the task to companies with experience in advising or assisting entire or partial acquisitions of financial institutions. They are also required to have overseas networks. Vichai Punpocha, general manager of Dresdner Bank AG in Thailand, said his bank's subsidiary Dresdner Kleinwort Benson (Asia) is interested in bidding for the contract. THAI OLEFINS: Chevron Looking to Take Stake in Troubled Situation ----------------------------------------------------------------- American oil giant Chevron is interested in buying new shares worth US$72 million (three billion baht) in Thai Olefins Co (TOC), a move that would help the Thai petrochemical feedstock producer to overcome cash problems, according to a report in the Bangkok Post. TOC is increasing its registered capital from 6.25 billion baht to pay for a 25% lift in production capacity to improve economies of scale. Its current annual capacity is 380,000 tons of polyethylene and 190,000 tons of polypropylene. The company originally intended the additional output to be available next year, but hesitation by minority shareholders to buy the new shares has delayed the plan by at least a year. TOC was formed by the state-run Petroleum Authority of Thailand, which holds a 49% stake. The next biggest shareholders are Bangkok Polyethylene Co with 13.76%, Siam Cement Plc 13.32%, Thai Petrochemical Industries Group 6.86%, and Viny-thai Plc 5.29%. TOC chairman Sivavong Changkasiri said although Chevron had expressed interest in the new shares, it had not yet discussed details with his company. Chevron had been focusing on investment in Thai Paraxylene Co, a subsidiary of ThaiOil Co, and Thai Aromatics Plc, and would likely start negotiations with TOC after concluding talks on those projects, Mr Sivavong told the Post. 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., Princeton, NJ USA, and Beard Group, Inc., Washington, DC USA. Debra Brennan and Lexy Mueller, Editors. Copyright 1998. 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 $875 per month 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 * * *