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/raid1/www/Hosts/bankrupt/TCRAP_Public/990325.MBX T R O U B L E D C O M P A N Y R E P O R T E R A S I A P A C I F I C Thursday, March 25, 1999, Vol. 2, No. 59 Headlines * C H I N A & H O N G K O N G * FUJIAN ENTERPISES: Appoints Restructuring Advisers GUANGDONG INTERNATIONAL: Receives Bids for $100 to $200 Million GUANGZHOU INTERNATIONAL: Plan Outlined & PwC Likely to be Hired GUANGZHOU INTERNATIONAL: Obtains Judgment Against Borrower SING TAO: Lazard Tops Sam Zell's Offer for Majority Stake YUE XIU: Meeting with Bankers Next Week to Review Finances * I N D O N E S I A * INTI INDORAYON: Standard & Poor's Affirms Low Credit Ratings * J A P A N * AOKI CORP.: IBJ and Asahi Willing to Forgive Yen 160MM of Debt LONG TERM: FRC to Discuss Fate of Subordinated Loans to LTCB NOMURA SECURITIES: Moody's & S&P Lower Debt Ratings * K O R E A * DAEWOO: Faces Loan Restrictions from Creditor Banks HANBO STEEL: Creditors Consider Plan to Liquidate & Sell Firm HANVIT BANK: Looking for a Couple Hundred Mil of Foreign Money HYUNDAI: Faces Loan Restrictions from Creditor Banks KOREA LIFE: Financial Supervisory Service Assumes Control SAMSUNG CORP.: Sells Part of Retail Sales Unit to Tesco * M A L A Y S I A * PARAGON UNION: Records RM10.67 Million Year-End Losses * P H I L I P P I N E S * MUSIC CORP.: Restructures Operations & Spins-Off Units PHILIPPINE AIRLINES: European Banks Lend Support to Rehab Plan * S I N G A P O R E * TELEDATA (SINGAPORE): Suffers S$4 Million Year-End Loss VAN DER HORST: Explains Lapses in Disclosure * T H A I L A N D * QUALITY HOUSE: Proposing Balance Sheet Restructuring SAHA GROUP: Subsidiaries Offer Baht 2 Billion of Debentures SIAM CEMENT: Five-Year Debenture Issue Proves Popular SIAM MOTORS: Announces Plans for Further Downsizing ================================= C H I N A & H O N G K O N G ================================= FUJIAN ENTERPISES: Appoints Restructuring Advisers -------------------------------------------------- Troubled Fujian Enterprises (Holdings) has appointed PricewaterhouseCoopers to advise on its debt and asset restructuring, and is expected to reveal on Friday at its first meeting for all creditor banks a preliminary asset-restructuring plan, expected restructuring timetable and more financial details. Cameron McKenna has been appointed as Fujian's legal adviser on the restructuring. The appointments and the expected revelation of more information had been requested by creditor banks, which have grown impatient about the lack of progress in a repayment plan, says the South China Morning Post. Creditors are hopeful, the Post says, that Fujian Enterprises can escape bankruptcy with asset injections from the provincial government. Company officials told creditors last month the firm had about $4.1 billion in assets, exceeding its liabilities of about $3.3 billion, including about $1.1 billion in short-term debt. Some creditor banks have requested that the company continue paying interest, accelerate the asset-injection plan, increase transparency and form a steering committee of creditor banks to coordinate the debt and restructuring efforts. GUANGDONG INTERNATIONAL: Receives Bids for $100 to $200 Million --------------------------------------------------------------- The controlling stake in red chip Gitic Enterprises, indirectly held by bankrupt Guangdong International Trust and Investment Corp (Gitic) has attracted three bids ranging from $100 million to $200 million, reports the South China Morning Post. Three of the bidders will be short-listed as potential buyers of the 58.66% stake in Gitic Enterprises, and there would be three days for short-listed to conduct due diligence before a final bid was to be submitted by the middle of next month, a source said. The transaction is scheduled to be completed by June. The market price of the stake was $150 million before suspension of trading, which valued the whole company at about $256.9 million. KPMG partners Gabriel Tam Chi-kok and Alan Tang Chung-wah have been appointed liquidators of Gitic's SAR subsidiaries, Gitic Hong Kong (Holdings) and Guangxin Enterprises, while ICEA Finance Holdings has been appointed adviser on the sale of Gitic Hong Kong's interests in two listed firms, Gitic Enterprises and DC Finance, the Post relates, adding that troubled Guangnan (Holdings) will probably appoint BNP Prime Peregrine to advise on its debt and asset restructuring. GUANGZHOU INTERNATIONAL: Plan Outlined & PwC Likely to be Hired --------------------------------------------------------------- Guangzhou International Trust and Investment Corporation (GZITIC) is expected to carry out a restructuring plan to help pull out of its present financial difficulties. A initial restructuring plan was announced over the weekend at the first creditors meeting on March 18-19, according to a report circulated by The Xinhua News Agency. "We hope the restructuring will provide a way to resolve GZITIC's problems at present, and place it back on a sound development track in the long run," said Wu Ziyou, deputy director of the Guangzhou Development Planning Commission which represents the city government in handling GZITIC's affairs, a spokesman for PricewaterhouseCoopers told Xinhua. PwC has reportedly been invited to become GZITIC's financial adviser. Despite any idea about a restructuring plan, GZITIC remains in the shadow of a possible bankruptcy due to pressure from its subsidiary firm, Guangzhou Finance Company Ltd (GFC) operating in Hong Kong. GFC is besieged by a liquidation demand filed in the local high court by 11 overseas financial institutions. GFC's liquidation would severely undermine any restructuring plan by GZITIC, Wu Ziyou indicated in an interview with Xinhua. "It is very likely that in that case gitic would have no way out but to declare bankruptcy." Wu said he hopes these overseas financial institutions will calm down and voluntarily withdraw the liquidation demand from the high court. "That will give the people in Guangzhou time to carry out the rescue plan which will bring about more benefits to creditors than a liquidation," Wu said. GITIC has invited Baker & McKenzie to be GFC's legal consultant. "Both the city government and business circles have placed high hopes on GZITIC's restructuring," Wu related, GUANGZHOU INTERNATIONAL: Obtains Judgment Against Borrower ---------------------------------------------------------- Guangzhou International Trust And Investment Corp (GZITIC) won a court order to retrieve a US$1 million loan plus interest from one of its borrowers, Guangzhou Welding Road Plant, Guangzhou newspapers reported. The amount should be settled within 10 days after the court order became effective. The total amount due was put at US$4.1 million as of last November 3. The loan was made by Gzitic by an administrative directive to allow the plant to buy production facilities. If the plant failed to repay the whole sum, its owner, Guangzhou Tongyong Machinery Group, would have to make up 30 per cent of the balance. Gzitic and its financial adviser, PricewaterhouseCoopers, have this week been meeting members of 11 financial institutions to try to convince them to drop the winding-up petition against Gzitic's Hong Kong finance arm, Guangzhou Finance. Guangzhou Planning Commission vice- chairman Wu Ziyou told Gzitic's creditors last week that the winding up petition would have a decisive influence on the smooth restructuring of the group. SING TAO: Lazard Tops Sam Zell's Offer for Majority Stake --------------------------------------------------------- The news broke yesterday that Hong Kong tycoon Sally Aw is selling her publishing empire to an investment bank in an HK$525 million (US$67 million) deal intended to rescue her from bankruptcy. Sally Aw agreed to sell her 50.02% stake in Sing Tao Holding Ltd. to a subsidiary of Lazard Asia Ltd. after talks with a bidding group led by U.S. financier Sam Zell and several Dublin-listed investment funds fell apart. Aw had previously turned down an overture from Lazard in favor of the bid from Zell and his partners, but regulators killed the deal because it involved an offer for just part of Sing Tao rather than all shares as required under Hong Kong takeover rules. Shareholders are expected to meet as early as next month to decide whether or not to accept Lazard's offer, being made through subsidiary Astral Light Investment, a source close to Sing Tao told The Associated Press on condition of anonymity. Sing Tao shares rallied by 20% ti close at HK$1.20 (US$0.15), after being suspended from trading for one day on the Hong Kong Stock Exchange. Lazard is bidding HK$1.25 (US$0.16) per share, valuing the company at HK$524 million. If the Lazard deal succeeds, it will end a running drama that pitted two prominent Hong Kong families against one another, while exposing circulation fraud in Aw's newspaper business that raised questions about whether Hong Kong has a fair legal system. Aw, the heiress to a Hong Kong fortune that began with a cure-all ointment known as Tiger Balm, will likely get out of a bankruptcy proceeding filed by another wealthy Hong Kong family after selling her shares. Aw was dragged into bankruptcy court on Jan. 7 by Yosham Ltd., a private investment group run by Charles Ho, a Hong Kong tobacco tycoon's grandson who reportedly had lent Aw HK$294 million. Yosham sued Aw after she turned down an initial offer from Lazard, but now is expected to withdraw the bankruptcy action as it gets repaid from the Sing Tao sale. Sing Tao publishes the Chinese-language Sing Tao Daily News as well as the English-language Hong Kong Standard. Aw will be retained as a special adviser to the board, with a chance for sharing in future profits. Defeated Zell-led bidders China Enterprise Development Fund (CEDF) and Investment Company of China (ICC) said Wednesday that they had a legally binding contract with her. A representative of the Dublin-listed funds said the contract is still in force and they would enforce their rights. Ms. Aw reportedly favored CEDF's proposal, which offered a chairman's title and a small stake in Sing Tao. Her change was helped by Lazard offering her a consultancy position with Sing Tao, but the post is understood to be a face-saving move. Under the Lazard deal, Ms Aw will be removed as chairman but will receive HK$9 million a year as a consultant with Sing Tao. The consultancy contract will be subject to shareholder approval at a special general meeting next month. Lazard will also offer Ms Aw an HK$63 million unsecured loan. YUE XIU: Meeting with Bankers Next Week to Review Finances ---------------------------------------------------------- Yue Xiu Enterprises (Holdings), the Hong Kong investment arm of the Guangzhou municipal government, is expected to disclose to its bankers its cash-flow projection for this year and next. The information will be revealed during a trip to Guangzhou organized by the firm for about two dozens of its bankers on Monday and Tuesday. One Asian banker tells the South China Morning Post that he expects the firm to have a capital shortfall in servicing its debts. A European banker tells the Post that he believes Yue Xin will only experience repayment problems if banks started to call loans ahead of schedule. The latest balance sheet the bankers have seen for the firm shows assets of HK$25 billion and liabilities of about HK$9 billion. ================= I N D O N E S I A ================= INTI INDORAYON: Standard & Poor's Affirms Low Credit Ratings ------------------------------------------------------------ Standard and Poor's affirmed its decision to downgrade the corporate credit rating of Indonesian textile manufacturer PT Inti Indorayon Utama. In a statement, the New York-based credit assessor said it affirmed Indorayon's rating at "D" after cutting it from "CCC," adding that the rating outlook remained "not meaningful." A "D" rating is assigned when a company is at risk of defaulting on its obligation, failing to pay all of them as they come due. Standard and Poor's said the ratings on Indorayon's 110 million dollar unsecured notes due 2000 and 150 million dollar guaranteed notes due 2001 were also affirmed at "CC" and remained on creditwatch with negative implications. Indorayon said on March 19 that it would not pay bond coupons of 15 million dollars due March 29, nor the 150 million dollars of guaranteed notes that note holders have the right to put to the company on the same day. Indorayon's rating was cut in February by Standard and Poor's due to its failure to service bank obligations. The company sustained a prolonged interruption to its operating cash flow in the second half of fiscal 1998, caused by the closure of its integrated dissolving pulp and rayon mill at Porsea in North Sumatra, Indonesia. Weak rayon prices and the need to finance increasing working capital has consumed the positive operating cash flows from its rayon operations in Finland, AFP News noted. ========= J A P A N ========= AOKI CORP.: IBJ and Asahi Willing to Forgive Yen 160MM of Debt -------------------------------------------------------------- Industrial Bank of Japan said it is willing to give up loans totaling 80,582 million yen to Aoki Corp. if all other creditor financial institutions agree to extend aid to the ailing medium- size contractor. The planned loan forgiveness will have no impact on IBJ's earnings in the year to March 31, the bank told Jiji Press. Asahi Bank, another major creditor bank for Aoki, also announced a decision to forgive 80,862 million yen in loans to the contractor without affecting the bank's earnings projections. LONG TERM: FRC to Discuss Fate of Subordinated Loans to LTCB ------------------------------------------------------------ Financial Reconstruction Commission Chairman Hakuo Yanagisawa announced that the FRC will, this week, start discussing whether or not to protect subordinated loans provided to nationalized Long-Term Credit Bank of Japan and Nippon Credit Bank. The commission has not decided yet on how to deal with the fate of the subordinated loans introduced by the two failed banks but will place the issue on the table for informal discussions, Yanagisawa told a press conference. Hundreds of billions of yen worth of subordinated loans, which have low repayment priority in case of recipients' bankruptcies, were extended to LTCB and NCB mainly by insurance companies before the two became insolvent and came under temporary state control in October and December 1998, respectively. Questions about whether or not to protect the LTCB- and NCB-bound loans have been growing, with arguments centering on the advisability of regarding the banks under temporary state control as being in bankruptcy procedures. It is necessary for the commission to distinguish the difference between the status of temporary state control and ordinary bankruptcy procedures such as proceedings under the Corporate Rehabilitation Law, the Chairman indicated. NOMURA SECURITIES: Moody's & S&P Lower Debt Ratings --------------------------------------------------- Two major U.S. credit-rating agencies announced separately yesterday that they have downgraded the debt ratings of Nomura Securities Co. due to concerns over its capital position and profitability over the medium term. Moody's Investor Services Inc. lowered Nomura's long-term ratings from Baa1 to Baa2, the second lowest rank in the investment grade category, and has placed its current Prime-2 short-term ratings on review for possible downgrade. Meanwhile, Standard and Poor's downgraded the securities house's long- and short-term counterparty credit ratings to BBB and A-3, respectively, from A-minus and A-2. Moody's said its rating actions "resulted mainly from concerns over the growing pressure on Nomura's capital adequacy and from the deterioration in the firm's earnings prospects, both in the domestic markets and overseas." On March 12, Nomura asked several major banks to extend more than 300 billion yen in subordinated loans to help it cover a mammoth loss incurred by its affiliated non-bank financing firms. "Nomura's capital position remains under pressure because of the diminished equity base resulting from losses and restructuring costs and from sizable capital-intensive businesses in Japan and overseas," Moody's added. S&P said its downgrade reflects "concerns about the severely distressed asset quality of Nomura's Japanese non-bank affiliate, Nomura Finance, persistently large high-risk exposures in the U.S., and challenges associated with the implementation of its revised domestic strategy. * * * Currently, it is unclear if Nomura's profitability will improve significantly over the medium term, amid the intensifying competition in its home market." Nomura, Japan's largest brokerage house, has announced restructuring plans to cut 2,000 jobs from its 13,000-person work force by 2001. The company reported 207.2 billion yen (US$1.76 billion) in losses for the first half of the fiscal year ending later this month. On the Tokyo exchange yesterday, shares in Nomura Securities Co. (8604 JP) fell 76 yen, or 5.3%, to Yen 1,364. ========= K O R E A ========= DAEWOO: Faces Loan Restrictions from Creditor Banks --------------------------------------------------- The Korea Herald reports that the Daewoo's creditor banks are insisting that it and Hyundai submit revised debt restructuring plans by the end of this month or face loan restrictions. The report stated that analysts believe it will be impossible for these two groups to meet the government mandated target of reducing their debt to equity ratio to below 200 percent by the end of this year. Financial Supervisor Commission (FSC) regulators are insisting that asset reevaluations and non-monetary investments will not be acceptable means to reduce debt ratios. Without such accounting techniques available, Hyundai and Daewoo are anticipated to target a debt to equity ratio of 250 percent by the end of the year. Last December, Hyundai and Daewoo both signed an agreement with the Korean government calling for, among other things, the reduction of their debt-to-equity ratios to below 200 percent by the end of 1999. Asset evaluations allow conglomerates to re-adjust real estate prices upwards, and add the increase to their capital base. Non- monetary investments refers to the act of acquiring equity stakes through the sales of patents and other non-cash properties. Although current commercial laws clearly define asset reevaluations as a legal method of capital assessment, the FSC will not allow their use to be applied to the agreement reached last December. Earlier newspaper reports listed Hyundai's end of year 1998 debt to equity ratio as standing between 320 and 330 percent. Daewoo's debt to equity ratio has been reported to be between 306 and 386 percent as of December, 1998. HANBO STEEL: Creditors Consider Plan to Liquidate & Sell Firm ------------------------------------------------------------- Creditor banks of Hanbo Steel (KSE: 01920) are considering a plan to liquidate the bankrupt steelmaker to prepare for an eventual failure to sell the insolvent firm. Although talks between the banks and prospective buyers will continue, they are unlikely to conclude by the end of this month. The banks strongly hinted at the possibility of terminating the talks and proceeding with the liquidation of the firm. Dongkuk Steel (KSE: 01230) and a US consortium, led by Nabors Co, have reportedly showed interest in Hanbo. The Korea Herald reports that Hanbo creditors will commence negotiations with potential buyers of the firm this week. Creditors have reportedly asked two prospective buyers to submit proposals by tomorrow so that the documents can be examined and talks begin. Last month, a consortium including U.S. investment firms such as Third Avenue Fund, Carl Marks & Co., and Nabors Capital were give even more extra time to complete their appraisals of the financial and managerial status of the steel making facilities to be sold. An official at Hanbo's main creditor bank, the Korea First Bank (KFB) told the Herald that negotiations can no longer be delayed because of the Nabor's assessment schedule, A year ago, Dongkuk Steel Mill Company was the sole bidder and offered 1.72 trillion won to take over Hanbo in the first round of international bidding for the steel maker. However, creditors banks reportedly aborted bidding on Hanbo because Dongkuk's offering price won failed to meet their expectations. Dongkuk has criticized the creditor banks saying that the bidding has been manipulated against them with a view of getting as much money out of the sale as possible. Hanbo, once Korea's second largest steel maker, produced 3 million tons of steel products per year, but collapsed on January 23, 1997 under bank debts estimated at 8.35 trillion won. The value of the assets at Hanbo has been evaluated at 3.4 trillion won, although the construction of some facilities is still not complete. HANVIT BANK: Looking for a Couple Hundred Mil of Foreign Money -------------------------------------------------------------- South Korea's biggest commercial bank, Hanvit Bank, aims to raise up to 500 million dollars later this year by forging nebulous "strategic alliances" with hypothetical "foreign financial institutions." The plan was unveiled yesterday by Hanvit's President in response to government pressure calling for South Korean banks to lower their heavy debt levels to clean up their balance sheets by the end of next year. The president of Hanvit Bank, Kim Jin-Man, told journalists that the planned move would take place in the last six months of 1999 after a due diligence audit on the new bank's assets is completed in April or May. "Once this is finished, we are going to raise about 400-500 million dollars through strategic alliances in the international financial market, though it is difficult to disclose potential partners at this stage," he said. In addition, Hanvit plans to raise about 500 billion won (403 million dollars) through rights issues in the year 2000 if the local stock market recovers. Kim said the bank planned to lower its non-performing loans (NPL) ratio -- covering NPLs in arrears for three months or more -- to 2.5 percent by the end of 1999 from 5.38 percent at the end of 1998. "Even if we should report some losses this year, we will prioritise securing sound assets. We have secured enough provisions against possible loan losses and therefore see no major difficulty reducing NPLs to our target level," he said. Hanvit was formed on January 1 through the fusion of Commercial Bank of Korea and Hanil Bank, which together lost a record 3.36 trillion won in 1998, from 445 billion won a year earlier. But the bank's president said Hanvit aimed to raise its return on its equity to 15 percent and return on assets to 1.0-to-1.5 percent by the end of 2000. And, Hanvil's NPL ratio will be lowered to below two percent and its capital adequacy ratio fixed at about 12 percent by the end of 2001. Kim said the bank's management and its labor union had recently struck a compromise to lay off 280 employees of the total 11,500 staff in the first half instead of the bank's initial target to sack 350 people. "With the planned lay-off of 280 employees, I think the recent round of manpower adjustment is finished," he said. "If our first half result turns out to be good, I see no need for further layoffs," he said, adding the bank had already cut its manpower by about 32 percent in 1998. Rather than focus on reducing the number of employees, Hanvit Bank will try to improve the total costs to wage ratio and revenue to expense ratio, Kim said. In addition, to maximise the synergy of the merger, the bank will try to integrate the two institutions' corporate cultures through transparent personnel management, Kim said. Hanvit also plans to reduce the number of business units to four or five by the end of 2001 from the current level of 14. Asked whether Hanvit will accept asset revaluation as a means of reducing the country's conglomerates' debt-to-equity ratios, Kim said the bank would evaluate the situation on a case-to-case basis. Hanvit is a major creditor to the Samsung and LG conglomerates. South Korea's groups, or chaebol, are heavily indebted to now crippled local institutions following years of uncontrolled lending and lax regulation. Separately, Hanvit Bank's deputy president Lee Soo-Kil said bank loans to companies that are under "work-out" rehabilitation programmes amounted to about 2.7 trillion won. Of the total "work-out" loans, 340 billion won were non-performing, he added. HYUNDAI: Faces Loan Restrictions from Creditor Banks ---------------------------------------------------- The Korea Herald reports that the Hyundai's creditor banks are insisting that it and Daewoo submit revised debt restructuring plans by the end of this month or face loan restrictions. The report stated that analysts believe it will be impossible for these two groups to meet the government mandated target of reducing their debt to equity ratio to below 200 percent by the end of this year. Financial Supervisor Commission (FSC) regulators are insisting that asset reevaluations and non-monetary investments will not be acceptable means to reduce debt ratios. Without such accounting techniques available, Hyundai and Daewoo are anticipated to target a debt to equity ratio of 250 percent by the end of the year. Last December, Hyundai and Daewoo both signed an agreement with the Korean government calling for, among other things, the reduction of their debt-to-equity ratios to below 200 percent by the end of 1999. Asset evaluations allow conglomerates to re-adjust real estate prices upwards, and add the increase to their capital base. Non- monetary investments refers to the act of acquiring equity stakes through the sales of patents and other non-cash properties. Although current commercial laws clearly define asset reevaluations as a legal method of capital assessment, the FSC will not allow their use to be applied to the agreement reached last December. Earlier newspaper reports listed Hyundai's end of year 1998 debt to equity ratio as standing between 320 and 330 percent. Daewoo's debt to equity ratio has been reported to be between 306 and 386 percent as of December, 1998. KOREA LIFE: Financial Supervisory Service Assumes Control --------------------------------------------------------- The operations of Korea Life Insurance Company (a.k.a. Daehan Life) has been put under the control of the Financial Supervisory Service (FSS) pending its planned sale. The move comes after the incumbent management has been deemed to be incapable of pulling the company out of financial trouble. Additionally, The Korea Herald relates, the Financial Supervisory Commission (the decision making body of the FSS) has asked prosecutors to probe 13 current and former Korea Life executives on embezzlement and other charges. The executives are suspected of having smuggled foreign currency out of the country, as well as neglecting their duties and violating insurance laws. The report also mentioned that a month long special audit of the insurer has found that Korea Life Insurance Company's debts exceeded its assets by 2.9 trillion won as of the end of 1998. Korea Life is the third largest insurer in the nation, and posted a profit of 17.6 billion won last year Korea Life is owned by the Shin Dong Ah (a.k.a. Shindong-a) Group, whose chairman, Mr. Choi Soon-young, was arrested and charged with embezzlement last month. Choi is charged with smuggling $165 million out of Korea between May, 1996 and June 1997. Choi is also suspected of forcing to make Korea Life make 100 billion won worth of unsecured loans to SDA International (a Shin Dong Ah trading company subsidiary set up by Choi that was formerly known as Shinahwon) in order to repay debts owed to Korean banks. The government probe comes as the government tries to sell Korea Life to MetLife Insurance of the US for $1bn as part of a restructuring of 10 insolvent life insurers, the Financial Times noted. The Financial Supervisory Service (FSS) asked prosecutors to determine why Korea Life's debts exceeded assets by $2.4bn, most of which were bad loans to affiliates. The problems at Korea Life are expected to force the government to recapitalise the life insurer to protect policyholders. SAMSUNG CORP.: Sells Part of Retail Sales Unit to Tesco ------------------------------------------------------- Samsung Corp. (KSE:00830) will sell a part of its retail operations to Britain's Tesco. Samsung Corp, the flagship company of the Samsung Group said Tesco will invest US$250 million in exchange for management control of Samsung Corp's retail business unit, Homeplus and the retail sales unit at Samsung Plaza's branch in Bundang, a Seoul suburb. Tesco will set up a venture with Samsung Corp. to take over its retail sales unit by taking 51 percent of the new firm, with an option to increase its stake to as much as 81 percent. "Tesco agreed to invest roughly $250 million on the condition that it will take over the managerial rights to Samsung Corp.'s distribution unit," a Samsung spokesman said following a signing ceremony held at the Hotel Shilla on Tuesday at which a joint firm temporarily named "Samsung-Tesco" was formed. Under the deal, Tesco will secure a 51 percent stake in the firm initially and may further increase that proportion up to 81 percent, Samsung officials said. The deal was struck on the condition that Samsung will be given a buy back option of that stake in the envisioned joint venture. "The deal is structured to maximize foreign investment and learn the advanced distribution skills Tesco possesses as soon as possible," a Samsung official explained. The joint firm will manage the discount retail shop HomePlus based in Taegu and Pusan and the food division of the Samsung Plaza Pundang branch while Samsung Corp. retains control over the rest of the Pundang store as well as fashion outlet U2 Zone in Myongdong, downtown Seoul. The British food giant also agreed to employ all Samsung the workers at the department stores and discount shops after the takeover. Chief Executive Officers of Samsung-Tesco will come from Samsung Corp.'s distribution unit. The two parties differ on the specific conditions for the scale of buy back option and have yet to reach a final compromise, an official close to the deal said. =============== M A L A Y S I A =============== PARAGON UNION: Records RM10.67 Million Year-End Losses ------------------------------------------------------ Paragon Union Bhd has recorded losses of RM10.67mil for the year ended Dec 31, 1998, a further drop compared to the RM437,000 loss reported in the previous year. Group turnover decreased to RM19.798mil for the period under review from RM45.48mil previously, the company said in a statement announcing its unaudited preliminary results yesterday. Paragon, a supplier of components including moulded rubber products for the automotive, auto parts and accessories industries, said the downturn in the automotive and property sectors had significantly affected its revenue. The earnings were further eroded by the high interest expenses incurred for the proposed acquisition of Kinma Holdings Sdn Bhd (approximately RM2.5mil), write-off of fixed assets (RM0.7mil) as well as additional provision for bad and doubtful debts of approximately RM0.9mil. Prospects for the year remained unclear with the current state of economy, the Company said, adding that the recent relaxation of government policies on motor vehicle financing would have a positive effect on sales of its car accessories and components. ===================== P H I L I P P I N E S ===================== MUSIC CORP.: Restructures Operations & Spins-Off Units ------------------------------------------------------ The management of listed semiconductor firm Music Corp. recently implemented an internal restructuring program. The company's four subsidiaries had been separated into independent business units to be handled by different corporate managers. In a recently held investors' briefing, Music president and chief executive officer Michael Burton said the restructuring is in line with the company's plan to focus on its business lines by designating one company president for each subsidiary. The four businesses that were separated are Music's networking business under Music Semiconductor, Inc., Music Telecom, Inc., Music.Com, Inc. and Music's manufacturing services. A source from the company said the latter will later be spun off into a different firm. Among the new company presidents are: David Walls for Music Networking, Moshe Tal for Music Telecom, Philippe Bellosguardo for Music.Com and David Cutler for Music manufacturing services. Aside from the organizational restructuring, Music also shifted its accounting policy to US GAAP (generally accepted accounting principles) from Philippine GAAP to respond to the needs of the global business world. With the shift in the company's accounting principles are changes in Music's actual consolidated net losses last year to $36.71 million from 50.34 million Philippine pesos (PhP) in Philippine GAAP. PHILIPPINE AIRLINES: European Banks Lend Support to Rehab Plan -------------------------------------------------------------- Credit Agricole Indosuez, representing 17 European creditors of Philippine Airlines, is supporting the revised rehabilitation plan of the country's flagship airline, subject to certain conditions, PAL said in a statement yesterday. PAL said: "The lenders wish to record their belief that the plan has been prepared in a considered and equitable manner," quoting Emmanuel Feld and Thibery Gleizes of the aircraft finance department of Credit Agricole. PAL said Credit Agricole, comprising French, German and UK banks, described the plan as a "viable basis for the continuing rehabilitation" of the carrier. The consortium of partially secured creditors funded the cquisition of PAL's 12 wide-body Airbus aircraft, including four A340-300s and eight A330-300s, which is its entire regional and international fleet. ================= S I N G A P O R E ================= TELEDATA (SINGAPORE): Suffers S$4 Million Year-End Loss ------------------------------------------------------- The regional economic crisis and a debarment from all government projects following an embarrassing mix-up over a mobile phone licence tender took their toll on Teledata (Singapore) Ltd last year, The Star reports, pushing the main board-listed company deep into the red. The Intraco subsidiary suffered a bottomline loss of S$4.29mil, including an extraordinary loss of just over S$3mil for the financial year ended Dec 31, 1998, compared with a profit of S$1.2mil the previous year and no extraordinary item. "1998 had been a difficult year for the group. During this period, the impact of the regional economic crisis was fully felt. In addition, the P2P incident in April and the subsequent debarment of Teledata since October 1998 also affected the overall performance of the group," the telecoms services distributor said in a statement. Teledata was banned from all government contracts for two years following investigations into a denial by US giant GTE Corp that it was part of a Teledata-led consortium, P2P Communications Pte Ltd, bidding for Singapore's third cellelur phone licence. The denial came after the Telecommunication Authority of Singapore had awarded the licence to P2P costing some S$600mil on the understanding that the consortium included Teledata, Nat-Steel and Connecticut-based GTE. The ban also applied to firms formed by, or linked to, Teledata directors and partners after that date, the Singapore Straits Times reported. For the period under review, Teledata reported net losses before extraordinaries of S$1.27mil after write-downs for stocks and doubtful debts, compared with a S$1.2mil profit previously. Group turnover slipped 13% to S$80.86mil while operating profit before interest costs and amortisation and forex loss plunged 74% to S$1.66mil. VAN DER HORST: Explains Lapses in Disclosure -------------------------------------------- A week after the stock exchange asked Van Der Horst to explain what appears to be a series of disclosure lapses, the company yesterday issued an equally long reply tackling each point raised by the exchange. Dealing with the first of the SES' concerns, executive director Freddie Heng Kim Chuan said the company did not promptly announce the recall of its $151 million Asian Currency Notes for fear the disclosure would "cause panic" among investors and lead to suppliers withdrawing credit lines. The SES was alerted to the notes recall only when VDH said in its annual report released earlier this month that their holders had declared them "immediately due and payable" on Dec 30. In its March 17 letter, the exchange also sought more information on several entries and notes in the company's annual report. It wanted to know if: VDH's treatment of a provision as an extraordinary item complied with accounting standards; its significant associated companies are audited by a reputable accounting firm; and its $25 million investment in a wholly-owned subsidiary needs to be announced. The exchange also directed VDH to disclose the list of substantial shareholders which was absent from its annual report. In it four-page statement, VDH said it did not breach listing rules as the ACN call was "an integral part of the process" leading to its debt restrucutring. And lenders had indicated that the demand would not be enforced. The notes (which stood at $151.8 million in September) were declared by the holders to be "immediately due and payable" on Dec 30. The exchange had queried VDH for failing to disclose the "call of securities for redemption", which was a "material development". VDH's reply was that it announced in October that it had technically breached a financing agreement caused by the forced sale of some VDH shares owned by chairman Johannes Kotjo. This led to a debt restructuring which meant its lenders have the right at any time to declare the debts immediately due and payable. The ACN holders' move was therefore part of the debt revamp process. "Any announcement . . . could then be misleading and harmful . . . as it could cause panic among . . . investors and also lead to the disruption of . . . operations (caused by the suppliers' withdrawal of credit lines and customers' cancellation of orders)", which might then disrupt the debt revamp talks. VDH also said it had received "an indicative term sheet for the restructuring of debts" sent by its lenders led by Schroders but gave no details whether it had agreed to the terms. On the company's financial accounts, the SES said that while VDH's losses for the year remained unchanged at $222 million, $24.6 million of the losses were transferred from one section to another. (When VDH announced its final results last December, it had extra-ordinary losses of $30.8 million and $3.4 million contribution from associates.) In the annual report, extraordinary losses were reduced to $6.2 million while associates moved from profit to a loss of $21.2 million. This led its loss per share to go up from $1.69 to $1.91. VDH said this treatment was consistent with its accounting policy, adding that its statement on final results was "checked against the unaudited management accounts by the company's auditors and discussed during the Audit Committee meeting". The company also said its Indonesian subsidiaries -- PT VDH Indonesia Tbk and PT SSE-VDH Indonesia -- were audited by two firms that were, respectively, an affiliate of Deloitte & Touche and KPMG Peat Marwick. On VDH-SL Ltd, it said the extra $25 million was not new investment (which required an announcement by itself) but the conversion of a loan to equity and hence, in its opinion, did not require any announcement. VDH said it did not provide a list of substantial shareholders (anyone holding at least 5 per cent), as there was none as at Feb 18. The company used to be run by Indonesian businessman Johannes Kotjo and partner Bambang Trihatmodjo, second son of former president Suharto. Mr Bambang has left Singapore and Mr Kotjo has seen his stake in VDH dwindle to below 5 per cent. (Business Times =============== T H A I L A N D =============== QUALITY HOUSE: Proposing Balance Sheet Restructuring ---------------------------------------------------- Property developer Quality House (QH) disclosed that it will propose a debt restructuring plan involving a capital increase followed by a capital write-down for the purpose of erasing accumulated losses. "The capital write-down will not have an adverse impact on present shareholders and could bring about benefits in speeding up the process of achieving profitability and generating dividends for shareholders," said QH Managing Director Jumpol Meesuk. He said the company would begin with increasing capital through issuance of 219 million new shares under private placement to its wholly-owned subsidiary at the price of 1 satang apiece. QH's paid-up capital will then rose to 4.39 billion baht from 2.2 billion baht. Thereafter, QH would write down its capital to the same level at 2.2 billion baht, writing off those new shares sold to QH International, he said. "The capital write down will not reduce shareholder's equity," he stressed. Securities One (S-ONE) Executive Director Charnchai Kongthongluck told Business Day that the dilution effect would be seen after the recapitalization, however, the effect would disappear following the write-off. At present, S-ONE acts as financial advisor to QH. "Such a method will also create good benefits to creditors who will become QH's shareholders in the future through conversion of their loans to equity while QH International will be the only party handling the loss incurred from debt write-off by the amount of 2.19 million baht," he said, adding that approval has been given by concerned agencies. The Bangkok Post reported yesterday that the plan has been approved by both the Securities and Exchange Commission and the commerce ministry, quoting Mr Charnchai as saying that the "haircut" for the company satisfied all creditors, and would enable debt restructuring talks to proceed more smoothly. SAHA GROUP: Subsidiaries Offer Baht 2 Billion of Debentures ----------------------------------------------------------- Four more subsidiaries of the Saha Group will issue debentures totalling two billion baht this year to repay its offshore loans, said the group's chairman, Boonsithi Chokwatana, according to a report appearing in the Bangkok Post. The companies-Sahapathana Inter Holding, Thai Wacoal Plc, Thanulux Plc, and Textile Prestige Plc-will each issue 500 million baht of debentures to local and foreign investors. The announcement follows the earlier offering of one billion baht in debentures by two Saha Group subsidiaries: Saha Pathanapibul Plc and ICC International Plc. Mr Boonsithi said the new debentures will have a maturity of two to five years with further details, such as coupon rates and conditions, to be announced at a later date. The arrangers of the debentures have not yet been named, but Mr Boonsithi said both local and foreign financial institutions would be appointed. The four companies of the country's largest consumer products manufacturer and distributor, produce a wide range of fashion apparel for the local and export markets. "The new funds will be used to pay out our offshore loans which are mostly short-term. Part of the funds will also be used to allow our management to cut production costs by buying cheaper raw materials with cash," he explained. The group, which consists of more than 200 subsidiaries, has offshore loans totalling US$100 million. The Saha Group generated more than 85 billion baht in revenue last year and expects to maintain the same sales level this year. "The expected zero sales growth is mainly a result of the sluggish economy over the past two years. I have not seen any signs of a recovery this year," Mr Boonsithi said. Sales of consumer products in the first two months of the year fell slightly, with the effect of the water shortage on farm prices and incomes a big factor. Provincial markets contribute around 70% of the group's revenue from food sales, while Bangkok and its environs make up the remaining 30%. However, apparel and cosmetics were selling well in the capital, he added. Mr Boonsithi said the group was concerned about a possible fall in sales in the provinces which would have a flow-on affect for its wholesalers and retailers. SIAM CEMENT: Five-Year Debenture Issue Proves Popular ----------------------------------------------------- Siam Cement says its five-year debentures proved attractive to institutional investors during the two-day placement that ended Tuesday. Institutional investors were growing less worried by interest-rate volatility, the company said. Subscriptions for private investors opened yesterday and run to March 31. Issue 1/2542 carries a floating interest rate amounting to 3.5 points above the one-year fixed deposit rates of the four leading commercial banks. Issue 2/2542 carries a fixed interest rate of 10.50% per year. SIAM MOTORS: Announces Plans for Further Downsizing --------------------------------------------------- Siam Motors Group of Companies, a local producer and distributor of Nissan Cars, will further downsize its organization as it has projected the overall economy will remain sluggish in the next couple of years, according to the Group's President Phornthep Phornprapha. The downsizing plan is part of Siam Motors Group's major business restructuring officially announced in October last year. Then, the number of its employees was cut by half while several operating units were shut down. Phonthep said the new round of business downsizing will focus on reducing working procedures, which will definitely result in redundancy. The authorized management has gathered document on restructuring, which will be further proposed to Phonthep within this month, he said. In addition, Phonthep said the group will close down two to three additional companies that are not its core business. Most of those firms are operating in auto parts business, in which Siam Motors is just minority shareholder. "We expect total car sales will slightly increase to 150,000 units this year as the value-added tax reduction will help stimulating local consumption. The unemployment figure would remain high, while an increasing number of plants could be shut down," said Phornthep. He said that the downsizing would enable the group to reduce expenditures and improve its efficiency. As a result, the group will be more competitive, compared with other multinational rivals amid severe business competition. Even the huge decline of local car sales, Phornthep said the group has severe debt and interest payment. Some revenue gained from the sale of its shares in non-core business will be used for debt payment. Siam Motors group targets to export Big M pick-up truck of 2,210 units this year to Australia and New Zealand as the main markets. The export volume will increase to 6,309 units by the year 2000 and up to 6,480 units in 2001. The group will start exporting passenger car by the middle of next year with the annual volume of 3,600 units, he said. As of domestic sales, the group expects its total sales volume will increase from about 12,900 units in 1998 to about 14,000 units this year. 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. 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