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T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Thursday, January 21, 1999, Vol. 2, No. 14
Headlines
* C H I N A & H O N G K O N G *
BANK OF EAST ASIA: Makes full provision for loans
CNT GROUP: Citybus sale puts question mark over CNT income
CHINA CONSTRUCTION: Joins BOC in filing profits dive
DALIAN INTERNATIONAL: Creditors file grievances in court
GUANGDONG ENTERPRISES: S&P downgrades unsecured notes
GUANGNAN HOLDINGS: Director sold shares before suspension
INTERNATIONAL BANK OF ASIA: Makes loan provision
SWIRE PACIFIC: Faces $2b hit from joint venture
YI F TRADING: Hubei investment arm files for liquidation
* J A P A N *
BANK OF JAPAN: Hires McKinsey for restructuring advice
CHOU TRUST: Merger to create Japan's top trust bank
DAIEI INC: Chairman Nakauchi to give up president's post
MITSUI TRUST: Merger to create Japan's top trust bank
* K O R E A *
HALLA GROUP: Halla sells UK unit to pay creditors
HANIL SYNTHETIC: Firm starts court receivership
KIA MOTORS: Unionists organize rallies against layoffs
LG GROUP: Metals unit negotiating alliance to reduce debt
* T H A I L A N D *
BANKTHAI PCL: Results announcement
BIJOUX HOLDINGS: SET suspends trading
=================================
C H I N A & H O N G K O N G
=================================
BANK OF EAST ASIA: Makes full provision for loans
-------------------------------------------------
Bank of East Asia (BEA) and International Bank of Asia
(IBA) have become the latest local banks to say they will
effectively write off loans to bankrupt Guangdong
International Trust and Investment Corp (Gitic). On Sunday,
Dao Heng Bank's chief executive Kwek Leng-hai said the bank
had made a 100 per cent provision for its unsecured Gitic
loans. Yesterday, BEA and IBA announced they had made the
same provision.
Sources said banks and their auditors had been given
guidance by the Hong Kong Monetary Authority (HKMA) over
the level of provisions for their Gitic exposure. However,
the HKMA has said repeatedly banks' management should make
the final decision regarding provisions.
One source said: "Banks and their auditors are in
discussions with the HKMA about further provisions for
exposure to other Itics."
The HKMA has said banks should classify the unsecured
portion of loans to Gitic as "doubtful debt". This would
require a 50 per cent provision under HKMA guidelines.
(South China Morning Post 20-Jan-1999)
CNT GROUP: Citybus sale puts question mark over CNT income
----------------------------------------------------------
British transport giant Stagecoach Holdings' $1.31 billion
move to buy a 59.2 per cent stake in Citybus Group has
prompted concern over the future prospects of Citybus's
substantial shareholder, CNT Group. Analysts said CNT's
34.79 per cent stake in Citybus was both the company's
prime asset and also the main income source of CNT's
controlling shareholder Tsui Tsin-tong.
On Monday, Stagecoach offered $1.31 billion to buy both
CNT's stake in Citybus and the Citybus shares owned by
mainland's largest travel company, China Travel
International Investment Hong Kong. Stagecoach will also
buy 1.7 per cent of Citybus from the market.
The deal, which is conditional on shareholders' approval,
would give CNT about $794 million and China Travel about
$516 million.
Analysts said CNT could use the proceeds to reduce debt in
the short run but would lose its largest income stream in
the longer term. About a quarter of Citybus' earnings have
been consolidated into CNT's balance sheet since Citybus
floated in 1996. For the year to December 1997, Citybus saw
attributable profit jump 10 per cent to $131.25 million,
lifting CNT's attributable profit to $145 million that
year.
Other than the Citybus' stake, CNT has a paint-making
division, China Paint Manufacturing, and a small portfolio
of properties in Hong Kong and China. (South China Morning
Post 20-Jan-1999)
CHINA CONSTRUCTION: Joins BOC in filing profits dive
----------------------------------------------------
China Construction Bank yesterday became the second large
state bank to post plunging profits for last year,
reflecting the worsening domestic operating environment in
the wake of Asia's financial crisis. Profit tumbled 44 per
cent to 850 million yuan (about HK$791.18 million) for last
year, against a pre-tax profit 1.51 billion yuan a year
ago. Its poor results came after the Bank of China (BOC)
reported on Monday that profits had fallen by nearly 50 per
cent. (South China Morning Post 20-Jan-1999)
DALIAN INTERNATIONAL: Creditors file grievances in court
--------------------------------------------------------
Creditors of Dalian International Trust and Investment Corp
(Ditic), a fund-raising arm of the Dalian municipal
government, have decided to take the firm to court for
repayment default. At Ditic, three of the four banks that
lent money as part of a US$20 million certificate of
deposit decided to take the firm to court after it
defaulted on repayment.
"We are forced to take legal action," a lender said.
The banks are angry at Ditic's inability to arrive at
acceptable proposals after failing to repay principal on
maturity on October 23 last year, despite paying off the
principal on 10 billion yen (about HK$676.68 million)
Samurai bonds that matured on October 26.
"We are undertaking legal proceedings to recover the amount
due and would not rule out pursuing liquidation proceedings
against the company," a source said.
"The action will include seeking the amount Ditic paid
earlier on the Samurai bonds," the source said.
Original lenders of the one-year certificate comprised
Union Bank of Switzerland Hong Kong (UBS), Kredietbank Hong
Kong, Sanwa International Finance and Westdeutsche
Landesbank Hong Kong, although UBS has now sold the
certificates.
The lenders argued that under general loan arrangements, a
borrower should rank creditors equally, although one lawyer
said any company had the right to pay whoever it wanted,
and conditions differed according to the loan arrangements.
The lenders would seek a judgment from a Hong Kong court.
(South China Morning Post 19-Jan-1999)
GUANGDONG ENTERPRISES: S&P downgrades unsecured notes
-----------------------------------------------------
The Asian Wall Street Journal reports that Standard &
Poor's Rating Group (S&P) has lowered the ratings on
Guangdong Enterprises (Holdings) Limited's $500 million
8.875 percent senior unsecured notes and $250 million 8.75
percent senior unsecured notes from CCC- to CC. This
downgrade reportedly reflects major uncertainties regarding
the Guangdong's restructuring talks, which will affect the
repayment schedule of these notes.
S&P also revised the corporate credit rating of Guangdong
from CCC- to "not meaningful," because of the company's
announcement that it may suspend some principal payments on
debt until April 15.
The article stated that S&P reported Guangdong has said it
will freeze principle payments on obligations due over the
next three months as it attempts to workout a restructuring
agreement with its lenders.
GUANGNAN HOLDINGS: Director sold shares before suspension
---------------------------------------------------------
The Asian Wall Street Journal reported that earlier this
month an independent director of the Hong Kong listed
Guangnan Holdings Ltd. sold his shares in the company one
day before it announced it was suspending principal
payments to creditors on existing facilities. Guangnan's
share price has since plunged from HK $1.413 to HK $0.50
per share.
Insider trading, or seeking to take advantage of
confidential information, is not a criminal offense in Hong
Kong. However, people found trading on inside information
can be fined and removed from their position as directors
or executives.
Guangnan Holdings is 60 percent controlled by Guangdong
Enterprises of China, which is the Chinese Guangdong
provincial government's investment arm. Guangdong
Enterprises' financial advisor has suggested that the
company may be suspending principal payments while it
undergoes restructuring.
INTERNATIONAL BANK OF ASIA: Makes loan provision
------------------------------------------------
Bank of East Asia (BEA) and International Bank of Asia
(IBA) have become the latest local banks to say they will
effectively write off loans to bankrupt Guangdong
International Trust and Investment Corp (Gitic). On Sunday,
Dao Heng Bank's chief executive Kwek Leng-hai said the bank
had made a 100 per cent provision for its unsecured Gitic
loans. Yesterday, BEA and IBA announced they had made the
same provision.
Sources said banks and their auditors had been given
guidance by the Hong Kong Monetary Authority (HKMA) over
the level of provisions for their Gitic exposure. However,
the HKMA has said repeatedly banks' management should make
the final decision regarding provisions.
One source said: "Banks and their auditors are in
discussions with the HKMA about further provisions for
exposure to other Itics."
The HKMA has said banks should classify the unsecured
portion of loans to Gitic as "doubtful debt". This would
require a 50 per cent provision under HKMA guidelines.
(South China Morning Post 20-Jan-1999)
SWIRE PACIFIC: Faces $2b hit from joint venture
-----------------------------------------------
Conglomerate Swire Pacific's full-year earnings for last
year could be hit by a provision of at least $2 billion on
the value of its Shiu Wing Steel joint-venture
redevelopment project, far worse than previously thought,
financial analysts said.
Analysts who attended a Swire presentation last week said
the company indicated it would match the provisions made by
joint-venture partner Sun Hung Kai Properties (SHKP) for
the project when SHKP unveiled its year-end results in
October.
Sun Hung Kai Properties had made a $4.3 billion provision
against the fall in value of two projects - of which the
Shiu Wing Steel site is believed to have accounted for
about $2 billion to $3.5 billion.
Analysts said Swire's provision could be somewhere between
$2 billion and $3.5 billion -- similar to that of SHKP. The
provisioning level is significant because some analysts
expect Swire to report net earnings -- before provisions --
of about $4 billion to $4.5 billion. A $2 billion to $3.5
billion provision could wipe out a large chunk of the
company's profit. (South China Morning Post 20-Jan-1999)
YI F TRADING: Hubei investment arm files for liquidation
--------------------------------------------------------
The damage caused by the liquidity crisis affecting
mainland companies widened yesterday as an unlisted window
company in Hong Kong filed for liquidation and foreign
creditors decided to take another key trust and
investment corporation (Itic) to court.
The unlisted Hong Kong window company of the Hubei
provincial government, Yi F Trading, filed for voluntary
liquidation last Wednesday and a creditors' meeting
has been scheduled for Friday.
Bankers said accounting firm Ernst & Young was working on
liquidation of Hubei's investment arm, Yi F Trading.
A Hubei provincial government official yesterday said Yi F
would be put into liquidation because of its inability to
repay foreign debts, poor investments and a negative
business outlook.
Bankers said that problems at Yi F started before the onset
of the credit crunch. The Hong Kong branches of Japanese
lenders Sakura Bank and Asahi Bank last year filed a writ
in the High Court seeking claims of US$1.17 million arising
from a syndicated loan to Yi F and its guarantor Hubei
International Trust and Investment Corp (Hitic).
Sumitomo Bank was said to be seeking claims stemming from a
US$10 million bilateral loan to the company while Bank of
Tokyo-Mitsubishi was also seeking US$10 million from a loan
to the company and has filed a petition to wind up the
company.
Yi F has began to cease repayment of principal on some of
its loans since then. In March 1997 the company owed HK$920
million to 17 banks, according to sources. (South China
Morning Post 19-Jan-1999)
=========
J A P A N
=========
BANK OF JAPAN: Hires McKinsey for restructuring advice
------------------------------------------------------
The Bank of Japan bank has hired consultant McKinsey and Co
for advice on boosting efficiency in a move analysts say is
partly a response to criticism sparked by last year's
scandal and reports of excessive perks for officials.
A central bank spokesman said on Wednesday that the BOJ had
a contract with the international consulting firm and hoped
to hear its proposals sometime in the summer.
The BOJ is apparently the only central bank of major
nations whose shares are publicly traded. The government
holds 55 percent of the shares, with the rest held by the
private sector, including financial firms and individuals.
But shareholders have no say in setting bank policy and
need BOJ approval to transfer shares. (Reuters 20-Jan-1999)
CHOU TRUST: Merger to create Japan's top trust bank
---------------------------------------------------
Mitsui Trust & Banking Co. (8401) and Chuo Trust & Banking
Co. have agreed to merge by April 2000, the two announced
Tuesday.
The merged institution will be Japan's largest trust bank
in terms of outlets and assets under trust, with a net
business profit forecast to top 200 billion yen. With total
funds of 41.8 trillion yen, it will also be the second-
largest bank in the country.
The merger will take the form of a stock swap at the rate
of 3 shares of Chuo for 10 shares of Mitsui Trust. Mitsui
Trust will appoint the bank's chairman, with Chuo naming
its president.
After signing a merger agreement in May, the two trust
banks expect to receive shareholder approval at their
general meetings in June.
The presidents of both banks said Tuesday the merger will
enable a reduction of 40 billion yen in annual expenses.
Within five years of merging, the two banks will cut 2,000
jobs from a combined payroll of about 10,000, as 35
overlapping domestic branches will be integrated.
Impetus for the merger came from the Financial Supervisory
Agency and the Financial Reconstruction Commission, which
told the two trust banks they would have to undertake
aggressive restructuring to qualify for recapitalization
with public funds. The financial standing of both banks was
poor due to large ratios of nonperforming loans and
unrealized stock appraisal losses. Mitsui Trust had seen
its stock price briefly dip below 100 yen Thursday.
Chuo Trust purchased the Honshu branches of failed Hokkaido
Takushoku Bank in November, expanding its domestic network
to 111 branches. (The Nihon Keizai Shimbun 20-Jan-1999)
DAIEI INC: Chairman Nakauchi to give up president's post
--------------------------------------------------------
Daiei Inc. founder and chairman Isao Nakauchi will
relinquish day-to-day control of the struggling supermarket
chain, giving his job as president to Vice President Tadasu
Toba, the company said Wednesday. The personnel reshuffle,
approved by the Daiei board Wednesday, comes at a time
when Japan's largest supermarket operator is struggling to
survive under the weight of huge debts amid a prolonged
recession at home.
Despite his resignation as president, the 76-year-old
Nakauchi said he will continue his commitment to Daiei,
working on jobs related to Daiei's relations with outsiders
while having Toba supervise Daiei's in-house operations.
Nakauchi, who has served as Daiei president since he
launched Daiei, will focus in his capacity as chairman on
lifting his company out its business troubles stemming from
the recession and huge debt, company officials said.
Toba, 68, a former president of Ajinomoto Co. and a
certified accountant, said he will do his best to rebuild
Daiei as early as possible and pass the presidency onto the
next generation.
By relinquishing his post as president, Nakauchi apparently
sought to assuage creditor banks, who have been unhappy
about Daiei's recent performance. Daiei, which owes 2.6
trillion yen to banks in group debts, reported an
unconsolidated pretax loss of 25.8 billion yen in the year
to Feb. 28, 1998.
Toba, who has spearheaded Daiei's restructuring efforts, is
said to be regarded favorably by the creditor banks.
Daiei has unveiled a restructuring plan under which it
plans to sell land and other assets and list the shares of
subsidiaries to raise funds to repay its debts. The plan
has so far produced little results due to the continuing
deflation of assets, including land prices, thus
aggravating the dissatisfaction of the creditor banks.
(Kyodo News 20-Jan-1999)
MITSUI TRUST: Merger to create Japan's top trust bank
-----------------------------------------------------
Mitsui Trust & Banking Co. (8401) and Chuo Trust & Banking
Co. have agreed to merge by April 2000, the two announced
Tuesday.
The merged institution will be Japan's largest trust bank
in terms of outlets and assets under trust, with a net
business profit forecast to top 200 billion yen. With total
funds of 41.8 trillion yen, it will also be the second-
largest bank in the country.
The merger will take the form of a stock swap at the rate
of 3 shares of Chuo for 10 shares of Mitsui Trust. Mitsui
Trust will appoint the bank's chairman, with Chuo naming
its president.
After signing a merger agreement in May, the two trust
banks expect to receive shareholder approval at their
general meetings in June.
The presidents of both banks said Tuesday the merger will
enable a reduction of 40 billion yen in annual expenses.
Within five years of merging, the two banks will cut 2,000
jobs from a combined payroll of about 10,000, as 35
overlapping domestic branches will be integrated.
Impetus for the merger came from the Financial Supervisory
Agency and the Financial Reconstruction Commission, which
told the two trust banks they would have to undertake
aggressive restructuring to qualify for recapitalization
with public funds. The financial standing of both banks was
poor due to large ratios of nonperforming loans and
unrealized stock appraisal losses. Mitsui Trust had seen
its stock price briefly dip below 100 yen Thursday.
Chuo Trust purchased the Honshu branches of failed Hokkaido
Takushoku Bank in November, expanding its domestic network
to 111 branches. (The Nihon Keizai Shimbun 20-Jan-1999)
=========
K O R E A
=========
HALLA GROUP: Halla sells UK unit to pay creditors
-------------------------------------------------
The Korea Herald reported that the Halla Group sold its
United Kingdom heavy equipment and auto parts affiliate,
Halla Euro Enterprise Ltd. and has used the proceeds to pay
off its debts. The Halla affiliate was sold to Gemini
Financial Holdings for 73 million pounds. Halla officials
cited in a similar story in the Korea Times said that this
transaction completely settles all the debts of Halla Euro
Enterprise.
Halla Euro was set up in Hartfield, Hertfordshire in 1994
by Mando Machinery and Halla Engineering & Heavy Industries
to produce auto parts.
A second plant was established in Wales in 1996 to produce
construction equipment, including fork lifts.
Mando Machinery, Korea's largest automotive parts maker,
was a leading subsidiary of the Halla Group, which declared
bankruptcy at the end of 1997. Last year, Rothschild Inc.,
an American fund manager, orchestrated a deal to provide
bridge loans to Halla to get the group out of trouble.
The Rothschild company worked closely on the Halla group's
normalization plans and arranged for debts to be paid back
so various Halla companies could be sold to foreign
investors easily.
HANIL SYNTHETIC: Firm starts court receivership
-----------------------------------------------
The Korean language Maeil Kyungje reports that the Hanil
Synthetic Fiber Company was allowed to start a court
receivership procedure by the Changwon District Court on
January 19th, 1999. Although the company went bankrupt in
July of last year, it has been successful in its
restructuring efforts and expects to achieve without
difficulty this year's export goal of $250,000,000.
Hanil Synthetic Fiber was on the list of 55 nonviable firms
that the Financial Supervisor Commission (FSC) issued on
June 18, 1998 a being subject to immediate liquidation.
Creditor banks were to stop providing new loans to the
firms on this list issued by Korea's financial watchdog
institution.
Under the new court receivership, the Hanil Synthetic Fiber
now expects to normalize its operations within five years.
The president of the Hanil Synthetic Fiber company is Mr.
Kim Chung-jae.
KIA MOTORS: Unionists organize rallies against layoffs
------------------------------------------------------
The labor unions of Hyundai Motor Co. and Kia Motors Corp.
have strongly opposed the massive layoffs that the
companies have been seeking in the restructuring.
Hyundai Motor purchased Kia Motors and its affiliated
commercial vehicle maker Asia Motors late last year.
The unionists of the two automakers yesterday decided to
join hands against the layoff programs, adopting a 13-
article resolution.
They claimed that Hyundai had pledged to keep the number of
Kia workers as of June 30 last year when it took over Kia
late last year, but it got approval from the Seoul district
court to lay off 30 percent of white-collar workers on Jan.
15. Kia Motors is now under court receivership. At the
rally, the unionists called on Hyundai to immediately cease
the layoffs at Kia and Asia, to withdraw the upcoming
layoff program in the merger of Hyundai Precision &
Industry and Hyundai Motor Service into Hyundai Motor and
to draw up a program guaranteeing the laborers' right to
continue working. (Korea Times 20-Jan-1999)
LG GROUP: Metals unit negotiating alliance to reduce debt
---------------------------------------------------------
LG Metals is reportedly in negotiations with Nippon Mining
of Japan in hopes of establishing what would be the world's
largest copper smelting company, industry sources said
yesterday.
Asked to comment on the strategic alliance, LG
restructuring officials said negotiations are currently
underway with a number of companies, including Nippon
Mining and Metal Gellshaft of Germany.
However, industry sources said significant progress has
been made and that the alliance will come in the form of LG
selling a couple of its plants and then setting up a joint
venture.
They said LG has reportedly decided to sell its copper
smelter in Onsan and a copper foil plant in Changhang for
an estimated $1 billion before setting up a joint copper
smelting company with Nippon Mining.
At the same time, the alliance would bring LG a
considerable amount of cash, which could be used to improve
its financial structure and help reduce LG's overall debt-
to-equity ratio, the official said. (Korea Times 20-Jan-
1999)
===============
T H A I L A N D
===============
BANKTHAI PCL: Results announcement
----------------------------------
BankThai Pcl reports unreviewed/unaudited annual financial
statements as a loss of Bt16.58bn for the period ending
December 31, 1998. This compares with a loss of Bt1.825bn
for the corresponding 1997 period.
BIJOUX HOLDINGS: SET suspends trading
-------------------------------------
The Stock Exchange of Thailand (SET) has posted the "SP"
(Suspension) sign since 17 November 1998 against the
securities of Bijoux Holdings Public Company Limited
(BIJOUX) due to BIJOUX had not submitted the SET the
quarterly financial statements as of 30 September 1998.
Today, BIJOUX has submitted its quarterly financial
statement. Unfortunately, the SET still posts the "SP" sign
on the securities of BIJOUX because BIJOUX is facing the
possible delisting and has not enough number of independent
directors specified by the SET. (Stock Exchange of Thailand
20-Jan-1999)
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 1999. 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
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The TCR -- Asia Pacific subscription rate is $575 for 6
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For subscription information, contact Christopher Beard at
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* * * End of Transmission * * *