/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/980915.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 Tuesday, September 15, 1998, Vol. 1, No. 143 Headlines * C H I N A & H O N G K O N G * ARMATAYS ESTATES: Winding-Up Petition CHINA APOLLO: Trims Loss, But Hasn't Turned the Corner COSMOPOLITAN INTERNATIONAL: Posts Half-Year Loss FULLSON SHIPPING: Winding-Up Petition GRAND ORIENT: Investment Company Posts Half-Year Loss H B INTERNATIONAL: Status Report on Creditor Negotiations KOSONIC INTERNATIONAL: Restructuring & Rescue Proposal LAI SUN: Drop in Hotel Arrivals Taking its Toll METAL WALL: Winding-Up Petition NEW WEALTH: Winding-Up Petition OLS GROUP: Real Estate Concern Posts Half-Year Loss PEREGRINE GROUP: PricewaterhouseCoopers Sued Over Note Sale QCS GLOBAL: Deadline for Creditors to Present Claims SANTA'S FACTORY: Winding-Up Petition SINKO COMPANY: Liquidators Appointed SMARTS CO.: Winding-Up Petition SPECTRUM PACIFIC: Winding-Up Petition WARMINSTER ENTERPRISES: Winding-Up Petition WING ON: Department Store Posting Half-Year Loss * J A P A N * FUJI BANK: Asking Fyuo Business Group Members for Money FUJI BANK: Bad Debts Estimated at 2.6 Trillion Yen; Yikes! JUSCO CO.: Installing New Sales & Inventory Systems LONG TERM: LDP Mulls Alternative Rescue Scheme LONG TERM: The Bank is a Victim, and Solvent Too! NISSHO IWAI: "Thumbs Down," Analysts Say TOKYO STEEL: Bleak Financial Future Predicted TOSHIBA CORP.: Posts First Loss in Years * K O R E A * CHO HUNG: Asks For Extension On Self Rescue Plan Submission COMMERCIAL BANK: FSC to Provide Less Support Than Expected DEAR FRIENDS: Company Liquidates DONG AH: Creditors Agree To New Loans for Construction Firm HANIL BANK: FSC to Provide Less Support Than Expected HYONSUNG MACHINERY: Completes Creditor Reconciliation KIA MOTORS: Ford Withdraws from Second Auction KIA MOTORS: Government Hears Threat from Samsung KORYOWON MEDIA: Completes Creditor Reconciliation KYUNGGI CHEMICAL: KIB Names Fertilizer Co. As Workout Target NAMBUK CO.: Starts Creditor Reconciliation NAMSUN ALUMINUM: KIB Names Metals Company As Workout Target P & TECH CO.: Allowed To Start Liquidation SSANGBANG WOOL: Allowed To Start Liquidation TAEBAEK CONSTRUCTION: Taegu Affiliate Declared Insolvent * M A L A Y S I A * AZT SDN: Summons Issued by OCBC Bank (Malaysia) KT AUTOMATION: Liquidator Appointed PLATINUM VIDEO: Voluntary Winding-up * P H I L I P P I N E S * MANILA GAS: Government Said to be Keen on Selling Assets PHILIPPINE AIRLINES: Other Airlines Reject PAL Tickets PHILIPPINE AIRLINES: Chairman Hands Airline Stake to Union VICTORIAS MILLING: Charges SEC Coddled Accountants' Errors * T H A I L A N D * BANGKOK METROPOLITAN: BOT to Pick its Financial Advisor BANGKOK STEEL: Responds to Press Report re Nissho Investment KRUNG THAI: Value of Privatization Questioned ROBINSON DEPARTMENT: Defaults on US$170 Million of Debt SIAM CITY: BOT to Pick its Financial Advisor SIAM COMMERCIAL: Says It Will Join Government Capital Scheme THAI AIRWAYS: Restructuring Framework Established THAI PETROCHEMICAL: Creditors Upbeat on Debt-to-Equity Swap ================================= C H I N A & H O N G K O N G ================================= ARMATAYS ESTATES: Winding-Up Petition ------------------------------------- A meeting of members of ARMATAYS ESTATES LIMITED and BEAUX ESTATES LIMITED will be held at 8th Floor, Yu Yuet Lai Building, 43 Wyndham Street, Central, Hong Kong on Sept 25 at 10:30 am to consider the Statement of Affairs and further matters relevant to Creditor's Voluntary Winding-up of the company. The Provisional Liquidator is Robin Radcliffe at 8th Floor, Yu Yuet Lai Building, 43 Wyndham Street, Central, Hong Kong CHINA APOLLO: Trims Loss, But Hasn't Turned the Corner ------------------------------------------------------ China Apollo Holdings, posted a $15.83 million attributable loss for the six months ended June 30 compared with a $45.66 million loss a year ago. The exceptional items arose from the provision for a fall in value of listed investments. Operating losses amounted to $4.95 million down from the previous $45.66 million. COSMOPOLITAN INTERNATIONAL: Posts Half-Year Loss ------------------------------------------------ Cosmopolitan International Holdings, a Hong Kong real estate and securities investment company suffered a $20.11 million loss in the six months to June 30 as the value of its investments fell. It reported a $135.75 million profit for the same period last year. Turnover fell to $160.32 million during the period, against $418.29 million last year. It made a loss of $18.28 million from its investment. FULLSON SHIPPING: Winding-Up Petition ------------------------------------- A petition for the winding up of FULLSON SHIPPING LIMITED was presented to the High Court on July 30 by Wide Shine Terminals Limited of Rooms 201-205, 2nd Floor, Office Tower, HIDC, 18 Container Port Road South, Kwai Chung, New Territories, and the said petition is directed to be heard before the court at 9:30 am on Sept 23, 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 the Solicitors for the Petitioner, Clyde & Co. at 18th Floor, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong on payment of the regulated charges for the same. GRAND ORIENT: Investment Company Posts Half-Year Loss ----------------------------------------------------- Grand Orient, the investment company, posted a net loss of $7.4 million for the first half of 1998 compared with $1.8 million last year. It reported an exceptional loss of $130 million, including a $70.7 million provision for its property portfolio and a $59.3 million provision for diminution in value of interest in an associated company. Loss per share amounted to 7.4 cents while turnover fell to $37.59 million from last year`s $430.46 million. H B INTERNATIONAL: Status Report on Creditor Negotiations --------------------------------------------------------- The board of directors of H B International Holdings Limited issued an update on the current status of the Company's negotiations with potential investors for investing in the Company; and the negotiation with the banks for a formal standstill agreement and to inform Shareholders that a winding-up petition has been presented by a trade creditor against H B Electronics Limited. The Board reports that: 1. Discussions are still being carried out between the banks and a consortium ('Consortium') (comprising of potential investors who are independent third parties and the existing management of the Company, who are also existing shareholders of the Company holding approximately 15.5% of the issued share capital of the Company), in respect of a preliminary outline proposal ('Proposal'), despite the deadline for responding to the Proposal on 10 August 1998 as stated in the announcement dated 31 July 1998. The Proposal involved a potential equity investment in the Company and a restructuring of the debts of the Company and its subsidiaries ('Group'). As far as the Directors are aware, no specific deadline has been set by the parties. As at the date of this Announcement, the banks have not made any formal response to the Proposal. The terms of the Proposal are still subject to negotiation, which may or may not result in an agreement. 2. As at 31 August 1998, there are outstanding amounts of approximately HK$601 million due to the banks and approximately HK$250 million due to trade creditors. The Company is still in negotiation with the banks for a formal standstill agreement regarding the amounts owed to the banks by the Group. 3. As at the date of this announcement, there are 47 outstanding writs of summons which have been served on the Company and/or members of the Group, claiming for the aggregate amount of approximately HK$56 million, US$4.7 million and JPY5.7 million. Both the Company and H B Electronics are named as the defendants in some of the writs of summons. 4. A winding-up petition was served on H B Electronics, a wholly owned subsidiary of the Company, by a trade creditor, on 7 September 1998. The current principal activity of H B Electronics is raw material sourcing. Most of the trading and manufacturing of telephone and related equipments of the Group are now being carried out through Shenzhen Guo Wei Electronics Co., Ltd. ('Shenzhen Guo Wei'), which is the manufacturing arm of the Group and is a joint venture established in the People's Republic of China in which the Company has a 60% attributable interest in its registered capital. It is stated in an announcement dated 12 March 1998 that H B Electronics is a 'major subsidiary' of the Company within the definition of the SEHK Listing Rules. However, given that H B Electronics no longer engaged in substantial marketing activity, its contribution to the turnover of the Group is minimal, it is no longer a "major subsidiary" of the Company within the meaning of the Listing Rules. The Company has provided guarantees to some of the banking facilities of members of the Group, including guarantees to H B Electronics for the amount of approximately HK$345 million (the 'Guarantees'). As at the date of this announcement, the Company has not received any notice to pay the amount due under the Guarantees. As at 30 June 1998, the unaudited net deficit of the Group and the unaudited net deficit of H B Electronics was approximately HK$230 million and HK$399 million respectively. In view of the minimal contribution of H B Electronics to the turnover of the Group and that most of the trading and manufacturing activities are now being carried out by Shenzhen Guo Wei, the Board considers that the winding-up petition will not change the present position on the operation and cashflow of the Group as a whole, since the amount of approximately HK$601 million due to the banks of the Group as at 31 August 1998 referred to above, already included the amount due under the Guarantees. KOSONIC INTERNATIONAL: Restructuring & Rescue Proposal ------------------------------------------------------ On 13 May 1998, Kosonic International entered into the Agreement with Mr. Ko and the Investor which sets out the main terms of the Proposal. The Proposal aims to restructure and rescue the Group through, inter alia, an HK$105 million cash injection and provision of management expertise. The Proposal involves, inter alia: (i) the acquisition of the Operating Assets (some of which are currently seized by the PRC courts and the remainder were sold to an independent third party); (ii) a reduction of existing issued share capital of Kosonic by 60%; (iii) an issue of 970 million new Kosonic Shares to the Investor; (iv) the restructuring of debts owed to the Banks and the HK Creditors, amounting to approximately HK$465 million, to be settled by the issue of 465 million new Kosonic Shares and a cash payment of 5 cents for every HK$1 of debt owed; (v) a share swap of one Newco Share for every one Kosonic Share pursuant to a scheme of arrangement between Kosonic and the Shareholders under section 99 of the Companies Act; and (vi) the withdrawal of listing of the Kosonic Shares and the simultaneous listing of the Newco Shares by way of an introduction on the Stock Exchange. Completion is conditional on, amongst other things, the approval of the Proposal by the Listing Committee of the Stock Exchange. Upon Completion, the Investor will obtain the majority control of the Restructured Kosonic Group. As at 31 July 1998, the Group had outstanding debts of approximately HK$537.8 million, of which (i) approximately HK$307.8 million were owed to the Banks; (ii) approximately HK$157.2 million were owed to the HK Creditors; and (iii) the balance were owed to the PRC Creditors. As at the date of this announcement, based on verbal or written non-binding indications, consent-in-principle to the Proposal has been received from all the Banks and some of the HK Creditors representing an aggregate of over approximately 80% of the total unsecured indebtedness owed to these creditors. Following Completion, the Restructured Kosonic Group would operate as a going concern free from existing debts and liabilities. The shareholding structure of Newco upon Completion is expected to be: Investor 59.67% Banks 19.73% HK Creditors 9.67% Public Shareholders 4.94% Mr. Ko and his associates 3.99% Team Yield 1.95% Mr. Ng Siu Yu, Larry 0.05% A winding-up petition ("Petition") has been filed against KICL, Kosonic's principal operating subsidiary in Hong Kong and the investment holding company of the principal operating subsidiaries of Kosonic in the PRC. Hearing of the Petition has been adjourned from time to time to facilitate implementation of the Proposal. KICL is scheduled to report on the progress of the Proposal and to seek further directions as to adjournment of the hearing from the High Court of Hong Kong on 3 September 1998. Kosonic will send to its Shareholders a scheme document containing, inter alia, further details of the Proposal, the recommendation of the independent board committee, the letter of advice of the independent financial adviser, the valuation report on the Operating Assets and notices of the special general meeting and court meeting as soon as practicable. LAI SUN: Drop in Hotel Arrivals Taking its Toll ----------------------------------------------- Lai Sun Hotels International (LSHI) indicates it will post an 11.4% fall in first-half earnings to $53.83 million. Hit by the regional financial turmoil and a sharp fall in tourist arrivals in Hong Kong, LSHI said its hotel management arm-Century International Hotels and its 65% owned Ritz-Carlton Hong Kong returned lower contributions. This resulted in a 92.7 % in operating earnings to $3.13 million from $43.02 million. METAL WALL: Winding-Up Petition ------------------------------- A petition for the winding up of METAL WALL COMPANY LIMITED was presented to the High Court on by Kwong Wing Ching of Room 3201, Hin Wan House, Hin Keng Estate, Shatin, New Territories, and the said petition is directed to be heard before the court at 11:00 am on Sept 23, 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 Government Offices, 66 Queensway, Hong Kong on payment of the regulated charges for the same. NEW WEALTH: Winding-Up Petition ------------------------------- A petition for the winding up of NEW WEALTH BRAND HOLDINGS LIMITED was presented to the High Court on Sept 9 by Chung Wai Ho of Room 431, Block 21, Shek Kip Mei Estate, Kowloon, and the said petition is directed to be heard before the court at 11:00 am on Oct 14, 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 Government Offices, 66 Queensway, Hong Kong on payment of the regulated charges for the same. OLS GROUP: Real Estate Concern Posts Half-Year Loss --------------------------------------------------- OLS Group, the real estate and construction company in Hong Kong, reported a $25.51 million loss for he six months to June 30 against a $38.80 million profit last year. Turnover reached $152.94 million against last year`s $246.23 million. It made a $16.16 million provision for bad and doubtful debts. PEREGRINE GROUP: PricewaterhouseCoopers Sued Over Note Sale ----------------------------------------------------------- According to a report in the South China Morning Post, provisional liquidators of the collapsed Peregrine Group, PricewaterhouseCoopers, LLP, have been sued for damages and compensation by Korean bank for selling US$12 million promissory notes at half the face value without consent of the owner and then withholding the proceeds, and without seeking directions form the Court of First Instance. Korean Merchant was contacted by the liquidators soon after Peregrine went into liquidation on January 16 and had entered into a contract on June 12, 1995 to buy negotiable promissory notes from Peregrine. The notes were issued by Indah Kiat Pulp and Paper Corp on June 15 that year with a face value of $12 million and maturity date of June 15 this year. Mr Hague, on behalf of the liquidators, wrote to the Korean bank in February this year saying they were in a position to deliver the notes. The bank asked for the notes to be put into a Citibank account in Jakarta. By March 25, this had not been done. The liquidators said they were checking to see if the bank was beneficially entitled to them and that Peregrine had no security interest. By April, the liquidators said they would not deliver the notes unless the bank clarified swaps transactions alleged to be outstanding between it and Peregrine. The bank maintained these transactions were entirely separate and continued to claim that the liquidators had no right to sell the notes following threats to do so. The bank warned that it would be an inadvisable time to sell as there was no market interest in the particular securities. On June 9, under the direction of the liquidators, Peregrine sold the notes at less than face value. The bank claims it is entitled to the proceeds. It claims the notes could have been redeemed on June 15 for the face value. On that day, the issuer of the notes wrote to Bank Bira in Jakarta by fax instructing it, as the paying agent, that full payment would be made in respect of the notes maturity on June 15, 1998. The bank is seeking delivery of the proceeds, a court order for compensation from the liquidators, damages, interest and costs. QCS GLOBAL: Deadline for Creditors to Present Claims ---------------------------------------------------- The creditors of QCS GLOBAL RETAIL INFORMATION NETWORK ASIA PACIFIC LIMITED, which is being voluntarily wound up, are required on or before Oct 15 to send in their names, addresses and particulars of their debts or claims to the Liquidators of the said company, Betty Bik-Yuen Yeung at Caroline Centre, 10th Floor, 28 Yun Ping Road, Causeway Bay, Hong Kong, and if so required by notice in writing from the liquidators, are personally or by their solicitors to come in and prove their debts or claims at such time and place specified in such notice, or in default thereof, they will be excluded from the benefit of any distribution before such debts are proved. SANTA'S FACTORY: Winding-Up Petition ------------------------------------ A petition for the winding up of SANTA'S FACTORY LIMITED was presented to the High Court on Aug 28 by Credit Suisse whose principle place of business is at 23rd Floor, 3 Exchange Square, Central, Hong Kong, and the said petition is directed to be heard before the court at 11:00 am on Sept 30, 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 Solicitors for the Petitioner, Baker & McKenzie at 14th Floor, Hutchison House, Hong Kong on payment of the regulated charges for the same. SINKO COMPANY: Liquidators Appointed ------------------------------------ By order of the High Court, dated August 28, Mr Gabriel Chi Kok Tam and Mr. Alan Chung Wah Tang of 8th Floor, Prince's Building, 10 Chater Road, Central, Hong Kong have been appointed Joint & Several Liquidators of SINKO COMPANY LIMITED without a committee of inspection. SMARTS CO.: Winding-Up Petition ------------------------------- A petition for the winding up of SMARTS CO. LTD. was presented to the High Court on Aug 28 by Credit Suisse whose principle place of business is at 23rd Floor, 3 Exchange Square, Central, Hong Kong, and the said petition is directed to be heard before the court at 11:00 am on Sept 30, 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 Solicitors for the Petitioner, Baker & McKenzie at 14th Floor, Hutchison House, Hong Kong on payment of the regulated charges for the same. SPECTRUM PACIFIC: Winding-Up Petition ------------------------------------- A petition for the winding up of SPECTRUM PACIFIC LIMITED was presented to the High Court on Aug 20 by van Melle Confectionery (Shenzhen) Co. Limited whose principle place of business is at uyang Village, Kuichong Township, Longgang District, Shenzhen, Guangdong, China, and the said petition is directed to be heard before the court at 9:30 am on Sept 23, 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 Solicitors for the Petitioner, Baker & McKenzie at 14th Floor, Hutchison House, Hong Kong on payment of the regulated charges for the same. WARMINSTER ENTERPRISES: Winding-Up Petition ------------------------------------------- A petition for the winding up of WARMINSTER ENTERPRISES CORPORATION was presented to the High Court on Aug 20 by van Melle Confectionery (Shenzhen) Co. Limited whose principle place of business is at Tuyang Village, Kuichong Township, Longgang District, Shenzhen, Guangdong, China, and the said petition is directed to be heard before the court at 9:30 am on Sept 23, 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 Solicitors for the Petitioner, Baker & McKenzie at 14th Floor, Hutchison House, Hong Kong on payment of the regulated charges for the same. WING ON: Department Store Posting Half-Year Loss ------------------------------------------------ Wing On International Holdings, a Hong Kong listed company, went into red for the first six months of the year, posting a $1.5 million loss against last year`s $145 million profit. Operating profit was wiped out by a $93.3 million provision for losses in the value of listed investment and securities. The company also had to make a $10.5 million in severance payments It subsidiary, department store operator Wing On, posted an interim loss of $66.54 million against a $123.06 million profit last year. ========= J A P A N ========= FUJI BANK: Asking Fyuo Business Group Members for Money ------------------------------------------------------- News sources reported yesterday that Fuji Bank will this week look further into plans to increase its capital by up to 200 billion yen. The Nihon Keizai and Asahi newspapers said that Fuji will ask members of its Fuyo business group -- including Hitachi, Marubeni Corp, Canon, Yasuda Mutual Life Insurance and Yasuda Fire & Marine Insurance -- to inject money into the bank to accelerate bad-loan write- offs. Fuji would not confirm details of the plan, saying only it hope to implement the capital increase by March. FUJI BANK: Bad Debts Estimated at 2.6 Trillion Yen; Yikes! --------------------------------------------------------- Fuji Bank was holding 2,600 billion yen in both bad and risky loans at the end of March, the Nihon Keizai Shimbun said yesterday. The business daily said the bank`s potential bad loans that may turn sour in the future reached 2,400 billion yen. The figures were based on the bank's own assessment at the end of March. JUSCO CO.: Installing New Sales & Inventory Systems --------------------------------------------------- Notwithstanding previously reported financial turmoil, Jusco Co. (8267), a major supermarket operator, will introduce a new computing system to provide details of current sales and inventory at stores. The five-year project will start in fiscal 1999, with total investment set to reach 70-80 billion yen, according to a report appearing in The Nihon Keizai Shimbun. The project is also designed to simplify the distribution system by reducing the dependence on wholesalers. But Jusco plans to continue delivering products from a central distribution point after collecting them from wholesalers and makers. Jusco will also reform its product procurement division from fiscal 1999 by dividing it into several units such as product development, purchasing and inventory management. LONG TERM: LDP Mulls Alternative Rescue Scheme ---------------------------------------------- Shares in Long-Term Credit Bank of Japan Ltd. (8303 JP) fell 11 yen to 38 yen on concern over the bank's financial condition amid protests by opposition parties over a bailout of the bank using public funds. The government and the ruling Liberal Democratic Party are mulling another possible compromise with the opposition on how to handle LTCB, the Yomiuri newspaper reported. According to the new LDP plan, the LTCB would write off bad loans using its own capital. The government would manage LTCB for some time after rebuilding its capital with public funds, and then LTCB would merge with Sumitomo Trust & Banking Co., the report said. (Bloomberg, L.P. 14-Sep-1998) LONG TERM: The Bank is a Victim, and Solvent Too! ------------------------------------------------- Kyodo News reports that Finance Minister Kiichi Miyazawa said Monday that the Long-Term Credit Bank of Japan (LTCB) is a "victim" of press reports and market forces. LTCB's financial trouble since the start of the year has resulted from word of its crisis rather than mismanagement more serious than at other banks, Miyazawa said during a session of the House of Representatives ad hoc committee on financial system stabilization. Masaharu Hino, commissioner of the Financial Supervisory Agency, also told the session that LTCB is not insolvent as defined by the deposit insurance law. NISSHO IWAI: "Thumbs Down," Analysts Say ---------------------------------------- Nissho Iwai Corp. (8063 JP) fell 18 yen to 142. Last week Moody's Investors Service cut the trading company's long-term debt rating to "junk" because of Japan's weak economy and the company's exposure to Asia and other emerging markets. SBC Warburg Japan Ltd. cut the stock to a "sell" from a "reduce" after the ratings cut. (Bloomberg, L.P. 14-Sep-1998) The Thai Thansethakij newspaper reported last week that Nissho Iwai Corporation Co., Ltd. Has increased its equity stake in Bangkok Steel Industry Public Company Limited (SET:BSI) to 9.73% and has indicated its interested in supporting Bangkok in a capital increase. That depends, Bangkok Steel said in a report to the Stock Exchange of Thailand, on the result of the restructuring of debt with Bangkok Steel's creditors in order to help the company overcome the present economic crisis. Bangkok Steel explained that there are several points in the restructuring plan for example the conversion of short-term loan to long- term loan, the request for interest reduction and the capital increase including the reduction of operating expenses. At present, Bangkok Steel says it is not able to disclose more detail. TOKYO STEEL: Bleak Financial Future Predicted --------------------------------------------- Tokyo Steel Mfg. Co. (5423) projects a pretax loss of 3.5 billion yen for the first half through September, unchanged from a year earlier, due to sluggish demand for steel products, company officials told The Nihon Keizai Shimbun. The Tokyo electric-furnace steelmaker initially forecast a pretax loss of 2 billion yen for the six-month period. With special losses including a 1.8 billion yen loss on sale of a plant site, its net loss will balloon to 6.4 billion yen from 4.1 billion yen a year ago. Sales will likely fall 22% to 69 billion yen, down 3 billion yen on the initial projection. The Nihon Keizai explained that expanded exports have failed to offset the plunge in domestic sales volume of H-beam steel and hot coils. Operating losses are put at 3.6 billion yen. The firm also expects bad-debt losses of 400 million yen. Sales for the full year are projected to decline 18% to 137 billion yen. The company forecasts a pretax loss for the sixth straight year of 7 billion yen, down from the previous year's 8.4 billion yen. Shares in Tokyo Steel Manufacturing Co. (5423 JP) rose 2 yen to 535, in trading Monday. TOSHIBA CORP.: Posts First Loss in Years ---------------------------------------- Toshiba Corp. (TSE:6502) is expected to post a pretax loss of about 5 billion yen (US$36 million) for the first half ending September, 1998, compared with a year-earlier pretax profit of 25.4 billion yen (US$187 million), according to company sources. The electric and electronic equipment maker attributes the loss to a sluggish semiconductor market. This will be Toshiba's first half-year pretax loss since the early years following World War II. The firm, hard hit by its sluggish microchip business, also plans to cut 2,500 staff by March, president Taizo Nishimuro told a news conference. In trading Monday, shares in Toshiba Corp. rose 23 yen to 460, according to Bloomberg, L.P. ========= K O R E A ========= CHO HUNG: Asks For Extension On Self Rescue Plan Submission ----------------------------------------------------------- The Korea Herald reported that the Cho Hung Bank asked the Financial Supervisory Commission (FSC) to extend its October 31 deadline to work out its self-rescue plans. The same article speculated that this bank could be at risk for government closure. This speculation has been sparked by the bank's failed efforts to merge with at least three competitors. A senior official at Cho Hung was also cited last week as saying that the bank will start self- rescue programs by attracting foreign capital and cost cutting if further efforts fail. However, a foreign analyst has been quoted in the Korea Times early last month that the bank has no chance of surviving independently, and that even if it succeeds in attracting foreign capital, a one time capital injection cannot normalize Cho Hung. Cho Hung remains unable to gain access to international capital markets as its credit rating has been kept below investment level since late last year. The FSC, Korea's financial watchdog institution, established an evaluating committee in June to diagnose 12 commercial banks (including Cho Hung) which failed to meet the minimum 8 percent capital adequacy requirements set by the Bank for International Settlements (BIS). It issues closure order for five banks in late June, and has asked 7 other banks (including Cho Hung) to provide drastic self rehabilitation plans. These plans were to include payroll cuts, management layoffs, capital increases or decreases, and mergers with stronger banks. The FSC reportedly plans to keep alive only those banks that are able to meet the 8 percent BIS capital adequacy ratio by June, 2000 via these new rehabilitation plans. According to statistics published earlier, Cho Hung's BIS ratio was listed at 1.49 percent and its ratio of non performing loans was at 10.5 percent. Non-performing loans combines bad loans, plus substandard loans (or collateral- backed loans whose interest payments are overdue for more that six months). Bad Loans includes both doubtful loans and estimated losses. COMMERCIAL BANK: FSC to Provide Less Support Than Expected ---------------------------------------------------------- The Financial Supervisory Commission (FSC) announced Monday that the government has decided to provide a financial aid package of W4.53 trillion by the end of this month to the soon-to-merge Commercial Bank of Korea and Hanil Bank, according to a report appearing in the ChosunIlbo. This falls short of the W8.5 trillion in financial support from the government the two banks had earlier requested so that the merged entity could attain a BIS capital adequacy ratio of 10%. The FSC said the funds would be channeled through a capital investment of W3.27 trillion from the Korea Deposit and Insurance Corp. and also through a Korea Asset Management Corp. purchase of their combined bad credits in the amount of W1.26 trillion. The decision was made on the condition that the two banks make a 90.3% capital reduction, the Commercial Bank from W1 trillion to W100.2 billion and Hanil from W830 billion to W80.6 billion. The FSC explained that once the funding goes through, the government's share of the merged bank will amount to 94.76% and the BIS capital adequacy ratio of the two banks will be enhanced to 10%. DEAR FRIENDS: Company Liquidates -------------------------------- The Dear Friends Company advertised in the Korean language Maeil Kyungje that it will liquidate based on a decision of its creditors on July 31, 1998. The company's address is 51-11 Banpo 4-dong, Seocho-gu, Seoul, and the representative is Mr. Cho Mun-hyun. DONG AH: Creditors Agree To New Loans for Construction Firm ----------------------------------------------------------- The Korea Herald reported that creditors of the Dong Ah Construction Industry Company agreed last week to provide the company with additional rescue loans of 160 billion won. The loan will come from all of the company's creditors (according to their exposure as of August 20) with an interest rate set at 5.5 percent over prime. Furthermore, the banks decided to extend the remaining 211.7 billion won loan packages as planned from a 600 billion won package that was approved this past May. Creditors will also convert 83 billion won worth of debt into equity. The article stated that an important factor for Dong Ah's recovery was both its participation in a creditor workout program, as well as its recent success in bidding for Phase III of the multi-billion dollar Great Man-Made River Project in Lybia. The Korea Herald earlier this month reported that the Dong Ah Construction Industry Company had a debt to equity ratio of 590 percent. The creditor workout procedure is aimed at helping firms hit by temporary liquidity shortages to regain financial health and competitiveness through debt relief and creditor offered restructuring programs. It is also hoped to reduce banks' non-performing loans by improving borrowers' debt payment capabilities. However, the workout can also result in the shareholders being asked to reduce capital and the disposal of unprofitable assets and subsidiaries. Furthermore, there is a compulsory shake-up of the top management of the "workout companies". HANIL BANK: FSC to Provide Less Support Than Expected ----------------------------------------------------- The Financial Supervisory Commission (FSC) announced Monday that the government has decided to provide a financial aid package of W4.53 trillion by the end of this month to the soon-to-merge Commercial Bank of Korea and Hanil Bank, according to a report appearing in the ChosunIlbo. This falls short of the W8.5 trillion in financial support from the government the two banks had earlier requested so that the merged entity could attain a BIS capital adequacy ratio of 10%. The FSC said the funds would be channeled through a capital investment of W3.27 trillion from the Korea Deposit and Insurance Corp. and also through a Korea Asset Management Corp. purchase of their combined bad credits in the amount of W1.26 trillion. The decision was made on the condition that the two banks make a 90.3% capital reduction, the Commercial Bank from W1 trillion to W100.2 billion and Hanil from W830 billion to W80.6 billion. The FSC explained that once the funding goes through, the government's share of the merged bank will amount to 94.76% and the BIS capital adequacy ratio of the two banks will be enhanced to 10%. HYONSUNG MACHINERY: Completes Creditor Reconciliation ----------------------------------------------------- The Seoul District Court advertised in the Korean language Maeil Kyungje that the Hyunsong Machinery Company has completed its creditor reconciliation procedure. The company's address is 513 Taepyong-dong, Chung-gu, Taechun- shi, and the president is Mr. Kim Chung-sun. KIA MOTORS: Ford Withdraws from Second Auction ---------------------------------------------- Ford Motor Company announced late last week that it has withdrawn from the auction of bankrupt Kia Motors Corp., citing Kia's sizable debts. Ford's withdrawal came a day after it joined three South Korean automakers in submitting letters of intent to take part in a new auction of Kia. "Although we still believe that a Ford-Kia alliance was in the interest of both companies, as well as for the nation of Korea, we are unwilling to take control of a company that is saddled with an unreasonably high amount of debt," Ford Vice Chairman Wayne Booker said in a statement. "We believe the level of debt that the creditors have specified will make it very difficult, if not impossible, for Kia and Asia Motors to be successful, internationally competitive companies," Booker said. The auction -- the second involving Kia -- follows one earlier this month that failed to find a buyer. Potential buyers now include Hyundai Motor Co., Daewoo Motor Co. and Samsung Motors Inc. New bids must be submitted by Sept. 21. The winner will be announced Sept. 28. KIA MOTORS: Government Hears Threat from Samsung ------------------------------------------------ According to a report appearing in the Hong Kong Standard, Samsung Goup will give up its new car business entirely if it loses out to US giant Ford Motor in the race to acquire Kia Motors, quoting a top industry figure, Federation of Korean Industries deputy chairman Shon Byung Doo, over the weekend. KORYOWON MEDIA: Completes Creditor Reconciliation ------------------------------------------------- The Seoul District Court advertised n the Korean language Maeil Kyungje that the Koryowon Media Compay has completed its creditor reconciliation procedure. The company's address is 70 Kyungun-dong, Chongno-gu, Seoul, and the president is Mr. Kim Nak-chun. KYUNGGI CHEMICAL: KIB Names Fertilizer Co. As Workout Target ------------------------------------------------------------ The Korean language Maeil Kyungje reported that the Korea Industrial Bank has named Kyunggi Chemical Industry Company as a workout target. The bank will hold a creditor meeting for Kyunggi Chemical Industry, a fertilizer maker on September 22. The workout procedure is aimed at helping firms hit by temporary liquidity shortages to regain financial health and competitiveness through debt relief and creditor offered restructuring programs. It is also hoped to reduce banks' non-performing loans by improving borrowers' debt payment capabilities. However, the workout can also result in the shareholders being asked to reduce capital and the disposal of unprofitable assets and subsidiaries. Furthermore, there is a compulsory shake-up of the top management of the "workout companies". NAMBUK CO.: Starts Creditor Reconciliation ------------------------------------------ The Seoul District Court advertised in the Korean language Maeil Kyungje that the Nambuk Company has started its creditor reconciliation procedure. Creditors have until October 15 to file their claims. The company's address is 379-2 Taebang-dong, Tongjak-gu, Seoul, and the president is Mrs. Kang Kyung-ae. NAMSUN ALUMINUM: KIB Names Metals Company As Workout Target ----------------------------------------------------------- The Korean language Maeil Kyungje reported that the Korea Industrial Bank has named the Namsun Aluminum Company as a workout target. The bank will hold a creditor meeting for Namsun Aluminum on September 18. The workout procedure is aimed at helping firms hit by temporary liquidity shortages to regain financial health and competitiveness through debt relief and creditor offered restructuring programs. It is also hoped to reduce banks' non-performing loans by improving borrowers' debt payment capabilities. However, the workout can also result in the shareholders being asked to reduce capital and the disposal of unprofitable assets and subsidiaries. Furthermore, there is a compulsory shake-up of the top management of the "workout companies". P & TECH CO.: Allowed To Start Liquidation ------------------------------------------ According to the Korean language Maeil Kyungje Business Brief section, the Chunan District Court has approved the liquidation plan of the P & Tech Company. SSANGBANG WOOL: Allowed To Start Liquidation -------------------------------------------- According to the Korean language Maeil Kyungje Business Brief section, the Seoul District Court has approved the liquidation plan of the Ssangbang Wool Company, one the major underwear makers in Korea. TAEBAEK CONSTRUCTION: Taegu Affiliate Declared Insolvent -------------------------------------------------------- According to the Korean language Maeil Kyungje's Business Brief section, without citing sources, the Taebaek Construction Company, an affiliate of the Taegu Department Store is now insolvent. =============== M A L A Y S I A =============== AZT SDN: Summons Issued by OCBC Bank (Malaysia) ----------------------------------------------- OCBC Bank (Malaysia) Sdn Bhd issued a summon against AZT Sdn Bhd on account of a total debt of RM103,107.03 owing. KT AUTOMATION: Liquidator Appointed ----------------------------------- The high court of Malaya at Johor Baru on 20/8/98 ordered the appointment of liquidator for KT Automation (M) Sdn Bhd. PLATINUM VIDEO: Voluntary Winding-up ------------------------------------ The members of Platinum Video Sdn Bhd on 10/9/98 resolved to wind-up the company voluntarily. Creditors of the company are requested to submit their claims before 20/10/98. ===================== P H I L I P P I N E S ===================== MANILA GAS: Government Said to be Keen on Selling Assets -------------------------------------------------------- The Estrada administration has reportedly found no use of the Manila Gas Co.'s existing pipeline facilities and is said to be seriously considering the separate sale of the firm's idle real estate properties and existing franchise. BusinessWorld sources said the government is now looking for buyers of the gas firm's 5.2-hectare lot in Paco, Manila and 1.2-hectare prime asset in Cebu. The government is also said to be toying with the idea of selling its existing gas distribution franchise within Metro Manila, although it has reportedly given up on the idea that it could still make use of the pipeline facilities. On the optimistic view, an industry insider told BusinessWorld, Manila Gas may remain as a government-owned and controlled corporation (GOCC) with "likelihood" of entering into a joint venture with foreign investors once a major portion of the firm is privatized. PHILIPPINE AIRLINES: Other Airlines Reject PAL Tickets ------------------------------------------------------ The Associated Press reports that 230 of the 231 airlines in the International Air Transport Association (IATA) are now refusing to recognize Philippine Airlines(PAL) ticket holders. This means that passengers with PAL tickets will have trouble switching airlines if their travel plans change. This decision by the IATA stems from PAL's inability to repay US$25 million it owes to other carries. PAL officials are reportedly in talks with IATA members in an attempt to resolve this problem. PAL's pilots staged a 22 day strike in June, and its ground crew walked off the job for a week which worsened the problems the airline was seeing due to the Asian currency crisis. The strike forced PAL to drastically reduce its operations, including the suspension of both domestic and international flights. An interim receivership committee was formed to oversee the rehabilitation of the airline by the Philippine Securities Exchange Commission after PAL said it was unable to make payments on about $2.1 billion of debt. PHILIPPINE AIRLINES: Chairman Hands Airline Stake to Union ---------------------------------------------------------- According to a report in the South China Morning Post, Philippine Airlines chairman and majority shareholder Lucio Tan yesterday ceded 20 percent of equity in the airline to the labor union, as said by the company. Mr Tan agreed to transfer about 30 percent of his group's shares to the PAL Employees Association which would entitle the association to take up three seats on the troubled airline's 15-member board. In exchange, the union agreed to suspend its collective bargaining agreement, which observers said would give the airline some breathing room to improve its cash flow and reduce overhead costs. VICTORIAS MILLING: Charges SEC Coddled Accountants' Errors ---------------------------------------------------------- The new management of Victorias Milling Co. Inc., according to The Manila Times, accused the Securities and Exchange Commission (SEC) of allowing itself to be used by Sycip, Gorres, Velayo & and Co. to cover the accounting firm's negligence in its audit on the books and records of the sugar company. In a filing with SEC, Victorias said the Commission's decision to accept SGV's offer to assist the corporate watchdog in validating and substantiating through a reaudit the alleged non-disclosure of material facts and information by Vicmico, was without basis and has denied the sugar firm's constitutional right to due process. Victorias said the SEC accepted SGV's offer without notifying the sugar firm's officers, much less a hearing conducted to verify the representations of SGV, thereby denying Victorias constitutional right to due process. "In so doing, the SEC, wittingly or unwittingly may have allowed itself to be used by SGV to cover up its misdeeds," Vicmico said. "SGV's unilateral withdrawal from SEC of its audited financial statements of Victorias contravenes the canons of the CPECPA. The said code mandates an external auditor who discovers information different from those supplied or made available by the client to inform the client of such discovery and verify the truth of the same considering that the financial statements are owned by the client," Victorias said. Moreover, Victorias said in the prospectus of the initial public offering of Victorias shares in 1993, the sugar firm's financial statements which were audited by SGV were unconsolidated so that liabilities presented to prospective investors were only those of Victorias, the parent company. "The huge liabilities of Victorias's subsidiaries were not reflected there. This mis clearly against the requirement of the (GAAPS)," Victorias said. Under the GAAPS, "consolidated financial statements should include the statements of the parent company and all its subsidiaries. Even if the parent and its subsidiaries are engaged in dissimilar activities . . . consolidated financial statements shall be presented for the group." SGV, however, said Victorias management committee cannot claim damage from its withdrawal of reports because it has conducted its audit in accordance with the GAAPS. The Times relates that SGV was suspected of collusion with former key officers of Victorias in concealing material information in connection with the undisclosed sugar shortage during the fiscal years ending 1994 to 1996. The undisclosed sugar shortages padded Victorias' net income for the crop years ending 1994, 1995 and 1996 by a still undetermined amount. SGV was Victorias' accounting firm at the time. The management committee of Victorias earlier asked the SEC not to allow SGV to unilaterally withdraw its reports on the sugar firm's financial statements and go "scot-free" until it is proven that Victorias management had in fact deliberately misled the accounting firm in connection with the sugar shortages. SGV said the law required them to withdraw their audit reports the moment it became clear that the fraud committed by Victorias could have a material impact on the financial statements, not only on the matter of the shortages in the physical quantities of sugar but on other matters. Also, SGV said that as external auditor, it was not a guarantor or insurer of the accuracy of the financial statements prepared by Victorias management. Citing the statement of auditing standards of the Philippines, auditors, "do not guarantee audited financial statements and they do not vouch for the achievability of any forecast of future transactions." The SEC, meanwhile, is now preparing the filing of criminal charges against former officials of Victorias following findings by the Prosecution and Enforcement Department that the officers were apparently aware of the effort to conceal material information in connection with the undisclosed sugar shortages. =============== T H A I L A N D =============== BANGKOK METROPOLITAN: BOT to Pick its Financial Advisor ------------------------------------------------------- The Bank of Thailand is slated to pick today the financial adviser for the privatisation of Bangkok Metropolitan Bank. JP Morgan, Morgan Stanley, Merrill Lynch and Goldman Sachs are vying for the deal and have made the short list, according to Kitti Patanapongpibul, the deputy governor. As previously reported, the BOT announced it will hire a financial adviser to help the Thai authorities with the privatisation of the two nationalised banks, BMB and SCIB. The BOT began accepting applications on Aug 24, inviting companies with experience in entire or partial liquidations of financial institutions and those having international networks. The BOT received proposals from 11 applicants: JP Morgan, Credit Lyonnais Securities (Asia), CS First Boston (US), Morgan Stanley, Schroders (United Kingdom), LEK Partnership (UK), Merrill Lynch, Goldman Sachs, Crosby (Hong Kong), Lehman Brothers (US) and Citibank (US). BANGKOK STEEL: Responds to Press Report re Nissho Investment ------------------------------------------------------------ Bangkok Steel Industry Public Company Limited (SET:BSI) delivered a statement to the SET advising: "As it appeared in Thansethakij newspaper on the above mentined date regarding more investment of Nissho Iwai Corporation Co., Ltd. in Bangkok Steel Industry Public Company Limited. "The company would like to clarify that Nissho Iwai Corporation, presently holds 9.73% of shares in the company, is interested to support the company on the capital increase, but depends on the result of the restructuring . of debt with whole creditors in order to help the company overcome the present economic crisis. "There are several points in the restructuring plan for example the conversion of short-term loan to long- term loan, the request for interest reduction and the capital increase including the reduction of operating expenses. "At present, the company is not able to diclose more detail. If the result of the restructuring plan is concluded, the company will further inform the SET and investors." KRUNG THAI: Value of Privatization Questioned --------------------------------------------- Privatisation and restructuring of Krung Thai Bank is necessary to cope with greater future competition, as the bank's role in providing financial services to government agencies and state enterprises declines, asserts an article appearing in yesterday's edition of the Bangkok Post. Deposits from government sources will decline steadily, according to bank chairman Mechai Viravaidya. To promote efficiency and competition, the government plans to give state agencies greater authority in choosing financial institutions for managing funds and services. Ten years ago, the Post recalled, government agencies and state enterprises accounted for 70% of Krung Thai Bank's deposits. Now they provide 40% of the 700 billion baht lodged with the bank. The declining share of state business would force Krung Thai to focus more on retail banking, raising deposits through its extensive national branch network, Mr Mechai said. He conceded the bank would have difficulty competing for corporate deposits, where competition was based primarily on pricing and service. For several more years, the Post relates, Krung Thai would continue to serve as a government tool in implementing policy, although this role would decline steadily with privatisation. Even so, the Post says, state projects accounted for only 10% of the bank's 800 billion baht loan portfolio. As previously reported, the Thai government plans to sell a 20% stake in Krung Thai to a foreign partner within two years. The private sector will gain 51% control of the bank within five years. Under the government's financial reform scheme, Krung Thai will take over the assets, liabilities and deposits of First Bangkok City Bank by the end of the year. Deposits and performing assets of the Bangkok Bank of Commerce will also be absorbed. Krung Thai will, in turn, be recapitalised by the Financial Institutions Development Fund by exchanging outstanding loans to the two closed banks for equity. Krung Thai's assets will top 1.2 trillion baht when the mergers are completed. But Mr Mechai tells the Post that privatisation, restructuring and the loss of government business would cause the bank to shrink in the next few years. "The mergers won't make Krung Thai into a huge bank. The bank's role will shrink steadily, particularly in supporting and offering services to state agencies," he says. Changes and restructuring, the Post explains, would focus on four areas: (1) risk management would be improved and credit risk diversified; (2) the customer base would be divided into segments, tailoring services at local level; (3) operations would be restructured with information technology systems upgraded to international standard and back-office operations streamlined; and (4) costs would be reduced. Mr Mechai said the bank's image among foreign investors had to be improved. Foreign investors and analysts have criticised the bank's low profitability and asset quality stemming from its role as a state policy tool. This has made raising foreign capital and credit lines difficult for the bank. Mr Mechai said Krung Thai needed to restructure to build confidence among foreign investors, as well as attract deposits and business from state enterprises and government agencies. A foreign consultancy would be hired to help with operational restructuring, he said. Another Krung Thai Bank executive, who declined to be named when interviewed by the Post, said restructuring the bank's loan portfolio and maximising asset quality would be a key task in the next few months. Non-performing loans on a six- month past due basis totalled about 40% of the portfolio at the end of the first half of this year, he said. Rehabilitating the portfolio was the key to attracting a strategic partner at the best possible price. The bank is reportedly considering setting up one or several asset management companies to help recover losses on bad loans. Other options are also being studied, with the overall objective of minimising losses for the Financial Institutions Development Fund, the bank's largest shareholder. ROBINSON DEPARTMENT: Defaults on US$170 Million of Debt ------------------------------------------------------- ROBINSON Department Store Plc Monday reported to the stock market that it had defaulted on financial and foreign currency loan contracts including US$120 million in dollar loans and YEN 6.8 billion in yen loans over the past year. During the period, there were five defaults. An analyst at Amsteel Securities (Thailand) Co Ltd told The Nation that the firm does not have many choices for restructuring and must wait for the money from selling 14 per cent of BIG C department stores. He said it will have to negotiate with its creditors for loan rollovers or extending debt payment terms. Under the umbrella of Central Group, the debt restructuring would depend on the agreement of major shareholders. According to its filing with the SET on forex losses and loan defaults, the firm realised Bt180 million of the Bt4.9 billion in forex losses. According to its loan defaults report, in September 1995 it entered into a currency swap agreement with a foreign financial institution. According to this agreement, it had to pay $39.8 million on July 25, 1999, with interest of 8.315 per cent semi-annually, due on July 26, 1998. Secondly, in February 1996, the company issued unsecured debentures totalling $100 million to foreign investors. The debentures have a maturity period of five years with interest at Libor plus 1.1 per cent per annum and are fully redeemable on Feb 15, 2001. The company did not pay interest on debentures due Aug 15, 1998. In November 1997, the terms of a 1996 currency swap agreement between the company and Perigrine Fixed Income Ltd (PFIL) were superseded to provide for payment by the company of $6.85 million or payment by PFIL of $1 million on 25 annual settlement dates commencing on November 24, 1998. By letter dated June 8, 1998, Price Waterhouse, acting as the joint and several provisional liquidators of PFIL in Hong Kong, alleged that due to the liquidation of PFIL, an early termination event has occurred under the currency swap agreement referred to above pursuant to which the company is required to calculate the amount of any loss suffered by either party. The swap agreement and the extent of liability, which are complex, are under study by the legal counsellors of the company. Thirdly, in June 1997, the company issued unsecured debentures in the form of Asian Currency Notes programme totalling YEN 6.8 billion, divided into 6,800 debentures at YEN 1,000,000 per debenture, to several foreign financial institutions. The debentures have a maturity period of three years, bear interest at LIBOR plus 1.35%, and are fully redeemable in June 2000. The company did not pay the semi-annual interest due June 10, 1998. On the debentures issued date, the company entered into a currency agreement with foreign financial institutions. According to this agreement, the company had to pay $36.75 million and YEN 2.24 billion on June 10, 2000, with interest at the rate of LIBOR plus 0.97%, semi-annual payment, and computed on the principal amount of $54.85 million. The company did not pay semi- annual interest due on June 10, 1998. In April, 1994, the company issued convertible debentures totalling $40 million (divided into 40,000 debentures at $1,000 face value). The debentures had a maturity period of 10 years and bear interest at 4.25%. The holders can redeem their debentures, wholly or partly, at the redemption amount of $1,251.80 per debenture (face value plus redemption premium) on or after April 7, 1999. Finally, in August, 1995, the company issued convertible debentures totalling $49.79 million (divided into 4,976 debentures at $10,000 face value). Thedebenture had a maturity period of five years and bear interest at 3.25%. All debentures outstanding at the redemption date will be redeemed at $12,393 each. The company did not pay annual interest due on July 27, 1998. SIAM CITY: BOT to Pick its Financial Advisor -------------------------------------------- The Bank of Thailand is slated to pick today the financial adviser for the privatisation of Bangkok Metropolitan Bank and Siam City Bank. JP Morgan, Morgan Stanley, Merrill Lynch and Goldman Sachs are vying for the deal and have made the short list, according to Kitti Patanapongpibul, the deputy governor. As previously reported, the BOT announced it will hire a financial adviser to help the Thai authorities with the privatisation of the two nationalised banks, BMB and SCIB. The BOT began accepting applications on Aug 24, inviting companies with experience in entire or partial liquidations of financial institutions and those having international networks. The BOT received proposals from 11 applicants: JP Morgan, Credit Lyonnais Securities (Asia), CS First Boston (US), Morgan Stanley, Schroders (United Kingdom), LEK Partnership (UK), Merrill Lynch, Goldman Sachs, Crosby (Hong Kong), Lehman Brothers (US) and Citibank (US). SIAM COMMERCIAL: Says It Will Join Government Capital Scheme ------------------------------------------------------------ The president of Siam Commercial Bank (SCB), Dr. Olarn Chaipravat, confirmed to the Nation that the bank will apply for the government's tier-2 capital scheme within the next two weeks. SCB's move makes it the first bank to enter the special scheme after the Thai government announced a sweeping banking reform package on Aug 14 in an apparent effort to salvage the country's ailing financial sector. Olarn said that while so far SCB has restructured problem loans from time to time, the bank is now waiting for government guidelines on its tier-1 and tier-2 participation which should be out in one or two weeks. "After that, we will enter the programme immediately," Dr. Chaipravat additionally confirmed. But, the Nation pointed- out, he did not reveal the level of the bank's expected tier-2 capital. According to Olarn, SCB's capital adequacy ratio is at 9 per cent, of which 7 per cent represents tier- 1 capital. However, he said the bank would raise its tier-1 capital on its own even though state assistance for tier-1 capital is also available. Apart from the planned entry to the government's tier-2 capital scheme, SCB is also planning to launch debt instruments hoping to attract institutional investors overseas. But the timing of the launch has still not been decided and will depend on regional market sentiments. Fresh funds received from the launch will help increase the bank's tier-2 capital, Olarn said. Analysts surveyed by the Nation said most domestic banks are expected to join the tier-2 capital scheme in tandem as it is the only way to help get their financialpositions back on track. THAI AIRWAYS: Restructuring Framework Established ------------------------------------------------- Marketing adjustment and financial restructuring are urgently required for national carrier Thai Airways International, which has been badly hit by the regional recession and huge foreign exchange loss, according to board chairman Mahidol Chantrangkurn in an interview with The Nation. Permanent Secretary for Transport Mahidol said the airline's working group would submit a final proposal to revamp THAI's domestic and international operations as well as supporting activities to the board on Sept 24. The main objective is to enhance the airline's competitiveness as rivalry grows among carriers in the region. Based on a proposed framework, any adjustment to the carrier's marketing strategy should involve maximum aircraft utilisation, appropriate flights planning and an end to loss-making routes. In addition, the airline will stand to gain from the fifth freedom right agreement. As an urgent measure, the airline will adjust its marketing plan for its winter operations, starting next month. The schedule is expected to bring in an annual operating profit of Bt7-8.5 billion without the need for currency-adjustment loans. For domestic flights, the airline is to gradually reduce the monthly operating loss of over Bt100 million before returning to the black by 2001 through the aircraft- utilisation plan. The airline will also adjust flights planning, frequency and fleet rationalisation for major and secondary routes in both regional and intercontinental markets. The restructuring is expected to generate a profit of Bt5.5 billion in US dollar terms. At the same time, routes that have posted losses over Bt50 million, such as the Bangkok-Osaka-Los Angeles and Bangkok-Jakarta-Sydney flights, which have recorded Bt500 million and Bt221 million losses in the first eight months of the current fiscal year ending May, will be terminated. For routes posting losses of Bt30-50 million, such as the Bangkok-Amsterdam-Zurich-Bangkok flight, a direct flight between Bangkok-Zurich-Bangkok will be adopted while Zurich- Amsterdam will be operated through a code-share agreement with an alliance airline. Supporting activities are also being reviewed based on cost- effectivness, THAI told the Nation. The working group is evaluating activities which the airline should not be directly involved in with the aim of cutting costs. Besides the marketing-adjustment plan, the airline has been ordered to review incentives for short- and long-haul flight attendants. Despite a huge unrealised forex loss of nearly Bt8 billion, Mahidol remains optimistic that the airline will be able to record a profit for transportation and supporting activities given the baht stays below Bt42 to the dollar. The airline must record currency-adjustment loans in baht value by September 30, the last day of the current fiscal year. The new accounting regulation requires all listed companies to record their gains and losses based on the exchange rates for foreign loans which were recorded as deferred items, entire income or expenses when incurred. For the privatisation plan, the airline must proceed in line with the Act on Permitting the Private Sector to Participate in or Operate State Business BE 2535. However, the privatisation process will be completed in 1999 as scheduled with the initial public offering expected within the next seven to eight months. The state carrier will also select a strategic partner within the next 15 months. THAI PETROCHEMICAL: Creditors Upbeat on Debt-to-Equity Swap ----------------------------------------------------------- The Bank of Thailand, according to a report appearing in The Nation, confirmed that most of Thai Petrochemical Industry Plc's (TPI) creditors are interested in converting debt to equity, quoting deputy governor Kitti Patpong-pibul. "They are interested in the conversion to reduce their provisioning burden. Moreover, if the company performs better in the future, they will reap a nice return," Kitti said. TPI was to be one of 200 large companies to complete debt restructuring by the end of 1999. The companies will be selected by the Thai Bankers Association, Foreign Bankers Association, Association of Finance Companies, Board of Trade and Federation of Thai Industries. The central bank has announced 43 companies to date. He said the central bank learned of the creditors' interest when it was assisting debt-restructuring negotiations between TPI and its creditors who extended loans worth around US$3.8 billion to the Thai company. In line with central bank policy, to speed up the debt-restructuring process which will effectively reduce financial institutions' non-performing loans and consequently their provisioning requirements, each high-ranking official will be assigned to look after debt- restructuring negotiations for a few companies. Kitti was assigned to the TPI case. The Thai company has over 140 local and foreign creditors. The largest creditor is the Export and Import Bank of South Korea. "In the past, there have been lots of problems because of the high number of creditors. Some of them named 11 representatives for the negotiations but the others are displeased. The central bank thus needs to take part," he said. Last month, some foreign creditors convened at a Bangkok hotel and came to the conclusion that all creditors should convert their debt into equity. Kitti said it is impossible to assess how much of the $3.8 billion will be converted. Creditors and debtors able to restructure their problem loans by the end of 1999 are eligible to enjoy tax and accounting privileges. They will be exempted from corporate tax, special business tax and value-added tax incurred from the restructuring. Creditor banks will also be permitted to deduct losses incurred from restructuring. 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 * * *