/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/991223.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, December 23, 1999, Vol. 2, No. 250 Headlines * C H I N A & H O N G K O N G * CHINA NATIONAL PETROL.CORP.: To sign debt-for-equity deal CHINA PETROCHEMICAL CORP.: To sign debt-for-equity deal COSCO GROUP: Loses $360m after sale of stake GUANGDONG ENTERPRISES: Creditor acceptance of rehab likely JOYCE BOUTIQUE HOLDINGS: Posts narrower 6-month loss VISION TECH INT'L HOLDINGS: Poor showing in trading debut * I N D O N E S I A * KALBE FARMA: Reaches restructure deal with creditors PT NEWMONT MINAHASA RAYA: To halt gold production early SEMEN CIBINONG: Faces delisting for info non-filing * J A P A N * CRESVALE INT'L: Japan unit files for bankruptcy DAIICHI CHUO KISEN: Stock trading at all time low NISSAN DIESEL MOTOR CO.: Nissan, banks to inject 10B yen * K O R E A * DAEWOO CORP.: Court receivership in the picture DAEWOO GROUP: Foreign creditors reject debt rescheduling DAEWOO GROUP: Seen as setting market direction DAEWOO MOTOR: Hyundai gets ear of FSC official versus GM DAEWOO MOTOR: Creditors setting up auction situation HYUNDAI PIPE: Bank helping to sell shares for debt relief KOREA HEAVY INDUSTRIES: Loses $2 million order over strikes KOREA LIFE INSURANCE: Sues J.P. Morgan & Co. over losses * P H I L I P P I N E S * MONDRAGON INT'L PHILIPPINES: High court rejects CDC block NATIONAL STEEL CORP.: Court stops asset foreclosure action PHILIPPINE NAT.BANK: Concerns about Tan stake acquisition PHILIPPINE NATIONAL BANK: Central banker defends Tan stake * S I N G A P O R E * DEMAGA RINGKASAN TRADING: Loses stake in company for debts FHKT HOLDINGS: Narrows losses * T H A I L A N D * BANGKOK METROPOLITAN BANK: Struggles with interest spread BANK THAI: Struggles with interest spread NATIONAL FERTILISER CO.: Completes debt-for-equity swap PETROLEUM AUTHORITY OF THAILAND: Rehab plan okay near PIZZA PLC: Suing franchisor for $180 million on non-comp ag RADANASIN BANK: Struggles with interest spread SINO-THAI ENGINEERING CONST.: Files rehab plan SRITHAI SUPERWARE: Creditors approve rehab plan STECON: Court hearing on rehab Jan. 17 TELECOMASIA CORP.: Debt deal nearing conclusion ============================== C H I N A & H O N G K O N G ============================== CHINA NATIONAL PETROL.CORP.: To sign debt-for-equity deal CHINA PETROCHEMICAL CORP.: To sign debt-for-equity deal --------------------------------------------------------- The mainland's two oil giants, China Petrochemical Corp (Sinopec) and China National Petroleum Corp (CNPC), are expected to sign debt-for-equity swap agreements with asset management firms later this month. Sinopec was negotiating a swap deal with the China Construction Bank on loans at 13 subsidiaries worth more than 30 billion yuan (about HK$28 billion), the official China OGP newsletter said. They would be mainly debt- ridden ethylene producers in Maoming, Tianjin, Guanzhou, Zhongyuan and Beijing, as well as refineries in Yanshan, Baling and Anqing. A China Construction Bank official declined to comment on the report, but said it expected to make an announcement next week. The newsletter said the swap deal for the Maoming plant would be the biggest. It did not say how much debt was involved, but said the plant had stopped paying interests on loans of 12 billion yuan in October. The deal would lower its debt-to-asset ratio from 99 per cent to 30 per cent. (South China Morning Post 22-Dec-1999) COSCO GROUP: Loses $360m after sale of stake -------------------------------------------- Cosco (Hong Kong) Group has sold its 19.57 per cent holding in Lai Sun Hotels International as part of a strategy to divest non-core investments, selling it on the open market for about $250 million, which meant a $360 million loss on the investment. Cosco (Hong Kong) bought the holding for about $610 million in April 1997. Zhang Yongjian, general manager of the company's strategic planning and development division, said the Lai Sun Hotels shares were sold through Prudential- Bache Securities. He said the buyer's identity was unknown. According to press reports, international financier George Soros acquired the shares. Mr Zhang said the sale was in line with the plan by Cosco (Hong Kong), unveiled in March by company president Dong Jiufeng, to restructure its assets and lower debt. Cosco (Hong Kong) is the SAR flagship of China Ocean Shipping Co, the mainland's largest shipping firm. It is also the controlling shareholder of two listed companies: Cosco International Holdings and Cosco Pacific. Keith Wu Shiu-kee, executive director of Lai Sun Development, which holds the controlling shares in Lai Sun Hotels, said anyone who bought more than 10 per cent in Lai Sun Hotels was required to report to the stock exchange and the company's board of directors. Lai Sun Hotels had yet to receive such information, he said. Mr Wu said Cosco (Hong Kong) had slowed its investments in the hotel business and the sale might imply it considered the sector as a non-core business. When Cosco (Hong Kong) acquired the hotel stake two years ago, it was its first link with Lai Sun Development. The companies had said they would join forces to look at infrastructure-investment possibilities in the mainland. "[Despite the sale] we do not rule out any co-operation possibilities in infrastructure business in future," Mr Wu said. Lai Sun Hotels' shares yesterday closed at 64 cents, down seven cents. Analysts said the disposal would not have a significant impact on Lai Sun Development's mainland expansion plans. This year, Lai Sun Development formed a link to the Bank of China Group through the sale of three- year convertible bonds by its mainland property unit, Lai Fung Holdings, to a wholly owned property subsidiary of the bank. Lai Fung sold $600 million convertible notes to Sun Chung Estate. The notes will be convertible into Lai Fung shares at 65 cents each. (South China Morning Post 22- Dec-1999) GUANGDONG ENTERPRISES: Creditor acceptance of rehab likely ---------------------------------------------------------- The more than 120 creditors of Guangdong Enterprises (Holdings) (GDE) probably will accept its renewed debt- restructuring proposal, according to Bank of East Asia chairman and chief executive David Li Kwok-po. The new accord was an improvement on the plan proposed by GDE and its advisers in May, Mr Li said. "Although this plan is not 100 per cent perfect, it is already quite good," he said. GDE, the insolvent Hong Kong commercial arm of the Guangdong provincial government, is seeking to restructure US$5.59 billion in liabilities. Creditor banks will vote on the revised plan after a briefing by the company on January 12. Banks had been asked to take a haircut - or cut in loan principal - of 40 per cent to 60 per cent under the previous plan, Mr Li said, but the revised proposal reduces that to between 25 per cent and 35 per cent. Bank of East Asia was likely to write back bad-debt provisions made against GDE loans following the revised plan. As one of the seven major lenders to GDE, Bank of East Asia's bad-debt provisions surged more then fivefold to HK$1.5 billion last year. Other GDE creditors welcomed the new accord as it promised them a 19 per cent direct interest in the Dongshen Water Project, which would yield about US$146 million in dividends over 10 years. Analysts said GDE creditors were likely to accept the new proposal next month as the revised terms favoured creditors at the expense of shareholders. Shares in GDE's listed arms Guangdong Investment and Guangnan (Holdings) dropped further yesterday. They have lost 25 per cent and 21.5 per cent respectively of their value since the restructuring plan was unveiled on Thursday. (South China Morning Post 21-Dec-1999) JOYCE BOUTIQUE HOLDINGS: Posts narrower 6-month loss ---------------------------------------------------- Fashion-retailer Joyce Boutique Holdings has reported a smaller net loss in the first half to September 30 with the help of lower costs. Net loss narrowed to $22.02 million in the first half from $39.21 million in the same period last year. The company said the retail market remained "soft" in the first half and it was sceptical about the sustainability of an upwards trend in the past couple of months. "The retail environment, in general, in the first half . continued to be as difficult as it was in 1998. Since October, we have seen improvement in turnover in the Hong Kong operations, especially the World of Joyce multi-label stores. It is too early to predict whether this is a constant trend." Operating loss shrank to $22.44 million from $43.9 million previously. Turnover declined 12.87 per cent to $362 million. Part of the decline was attributable to the company's lacklustre performance in Taiwan. The company said the September earthquake in Taiwan had caused havoc to shopping sentiment there. Depreciation charges of the Taiwan flagship store had been eroding income, but booking of the depreciation charges would be completed by March, it said. (South China Morning Post 22-Dec-1999) VISION TECH INT'L HOLDINGS: Poor showing in trading debut --------------------------------------------------------- Vision Tech International Holdings (Vision Tech) - the last company to list on the mainboard of the Stock Exchange of Hong Kong (SEHK) in this century - dropped below its issue price on its trading debut yesterday. The Chinese audio-visual products distributor closed at $1.06, a 21.48 per cent decrease from its issue price of $1.35 per share. Total turnover amounted of $19.14 and 16.95 million shares. "Investors nowadays put their focus on technology stocks and Vision Tech is considered more as a manufacturing or consumer product stock rather than a hi-tech one," said Patrick Yiu, senior research manager of Kingsway SW Securities. Mr Yiu also noted that investors are cautious in buying Vision Tech stock because they are worried about the recent performance of some newly listed shares. For instance, the share prices of Asian Information Resources and Shenyang Public Utility both dropped below their issue price on their first day of trading last 16 December. Vision Tech made its trading debut at $1.3 per share, which is also its day-high, but it quickly sank to $1.2 after two minutes of trading. Day-low for the firm was $1. "We focus on a long-term perspective," said Hung Kam-ming, chairman of Vision Tech. "We didn't expect the share price to jump in the debut." Asked about Vision Tech's listing during the pre-holiday period in December when the stock market traditionally has thinner turnover, Mr Hung said the company's listing was intended to match its development instead of the development of the stock market. He said he is not worried about listing during the pre-holiday period. The firm offered 50 million shares for its initial public offering (IPO), of which 15 million shares are for the public. The IPO was 8.8 times oversubscribed. The remaining 35 million are intended for private placing and was 28 times oversubscribed. The main business of Vision Tech is the sale of audio- visual products in China and Hong Kong. It is also an exclusive distributor of AV products such as DVD players and large-size TVs for Samsung, Sony, Kenwood and JVC. The firm is currently in discussion with other brands as well, Mr Hung said. Meanwhile, SEHK senior executive director Lawrence Fok Kwong-man said a total of 32 companies were listed on the stock exchange this year compared with 32 in 1998. "The total capital raised is a lot more than last year's," said Mr Fok. He told reporters that the total capital raised (excluding Tracker Fund of Hong Kong) in 1999 was approximately $16 billion to $17 billion. "The second half of 1999, especially the last quarter, was a particular flourish. New listing is a lot better than in 1998," Mr Fok said. (Hong Kong Standard 22-Dec-1999) ================= I N D O N E S I A ================= KALBE FARMA: Reaches restructure deal with creditors ---------------------------------------------------- Kalbe Farma (KLBF) reached a commitment with its creditors regarding the restructurization of its US$ 177 mn. The commitment involved a five-year extension of the maturity period. (Asia Pulse 17-Dec-1999) PT NEWMONT MINAHASA RAYA: To halt gold production early ------------------------------------------------------- PT Newmont Minahasa Raya said it would halt its gold production activities in 2003 or 2004, six years earlier than scheduled, if no new reserves were found at its mining sites. Company manager for government and community relations Tri Harjono said on Monday that gold deposits at the mining site were heavily depleted due to fast and extensive production activities in the early years of the operation. He said the production level of the company, which has been plagued by conflicts with the local community, would still be significant in the next two years. Gold production output next year was expected to reach about 700 kilograms per month, above the 650 kilograms of gold bullion per month this year, he said. "Next year's production output will likely increase in line with the ostensible finding of troy ounce with higher gold concentrate." The company's production output from 2001 to the end of the mine's life span in 2003 or 2004, however, would likely decline because it would be more difficult to find the ore, he said. Tri said the company initially predicted that the gold mine, which has 2.1 million troy ounces of gold reserves, would have a 13-year life span until 2009. The local community is unhappy with the activities of the company, which began its commercial operations in mid-1996 after conducting exploration projects at the Minahasa mining site from 1986 to 1988. The local government said that the company, which is a subsidiary of Newmont Mining Corporation of the U.S., shirked paying full taxes. Newmont is also blamed for polluting local rivers. The company reported gold production of 58,000 ounces in the first quarter of 1998, 49 percent more than the 39,000 ounces produced in the same period of 1997. Tri said the company used better systems and equipment with higher technology to optimize and accelerate the excavation and production activities in its US$220 million gold mine, resulting in faster completion of the mine's life span. He said the company would reclaim the mining site after it was fully exploited or turn it into a mining study center, based on the local government's approval. The company is exploring two new sites in Bolaangmongondow regency as possible alternatives for future projects. "We began exploration on the two sites, which are also located within our contract of work areas, last year. We are set to make feasibility studies on the sites if the exploration indicates there are enough gold reserves there to be exploited," he told The Jakarta Post after a visit by House of Representatives Commission V covering industry, trade, investment and cooperatives. Commission members are visiting North Sulawesi to meet with government officials and private companies operating in the province. Commission members asked Newmont to clarify details of the recent conflict with the Minahasa regency. Minahasa regency filed suit against Newmont Minahasa Raya, accusing the company of not paying C-class taxes, a local tax imposed for the excavation of building materials and industrial minerals, including sand, stone and kaolin. It is yet another problem for the company, already beset by allegations it pollutes the surrounding environment and engaged in collusion in its establishment. The regency demanded the company pay Rp 61 billion in overdue taxes and asked the local district court to close down the company's mine if it failed to pay. Chairman of Commission V Bachtiar Chamsyah called on the local government to use appropriate means to solve the dispute. "A demand for foreign companies operating in Indonesia to terminate their operation without firm reasons could damage our image with foreign investors," he said. He said the Ministry of Mines and Energy, which issued the contract of work for Newmont Minahasa Raya, should also be blamed for the ambiguous contract terms. The mining company reported it paid the government $11.80 million in taxes, royalties and excises from January to October this year, much higher than the $6.40 million in 1998, $9.52 million in 1997 and $7.40 million in 1996. The tax payment did not include the C-class taxes demanded by the local administration. Company general manager Paul A. Lahti said the local administration misunderstood the terms of the contract of work regarding taxes obligations. He said the C-class taxes were applied only when a company gained added value by mining, selling or making another product out of the materials. "But that is not happening there. The overburden soil that we are removing is placed on a garbage dump. I have to point out here that there is not one mining company in the world that pays taxes on overburden," he told the Post. He denied allegations that the company caused marine pollution through waste management, which channels the processed wast into an underwater dumping site. He said the company regularly monitored its Environmental Impact Analysis (AMDAL). An examination has also been done and found no proof of the accusation, he added. Newmont Mining Corporation also operates in Sumbawa, West Nusa Tenggara; China; the Philippines; Kazakhstan and Mexico, with worldwide production of about 123 tons of gold a year. (The Jakarta Post 22-Dec-1999) SEMEN CIBINONG: Faces delisting for info non-filing --------------------------------------------------- Semen Cibinong (SMCB) might be delisted from the Jakarta Stock Exchange today if the company fails to submit the information of the placement of its US$ 200 mn fund. (Asia Pulse 17-Dec-1999) ========= J A P A N ========= CRESVALE INT'L: Japan unit files for bankruptcy ----------------------------------------------- Cresvale International's Japan operation yesterday filed for bankruptcy in the Tokyo District Court, two months after Japan regulators criticised it for violations related to its sale of funds operated by parent Princeton Economic International. The filing comes a day after Japanese prosecutors indicted a former vice-president of Yakult Honsha, Naoki Kumagai, and Cresvale's one-time president Akira Setogawa on charges of tax evasion over the bond scandal surrounding United States-based Princeton Economics. Cresvale allegedly exchanged Princeton bonds with money- losing securities held by other companies, so that unrealised losses would not surface on the books at least until the bonds matured. "This is good for Japan because this will be a trigger to change the Japanese accounting system," said Mitsuru Yoshikawa, director of the legal and tax research department at Daiwa Institute of Research, a think tank affiliated with Daiwa Securities Group. "Companies will not be able to sell products which write losses off the books of Japanese corporate clients." Cresvale has 21.5 billion yen (HK$1.6 billion) of bonds which have already matured and 106.1 billion yen of bonds yet to mature. Receivers will examine Cresvale's assets during the next few months and see if it can retrieve some, said Hideyuki Sakai, a government prosecutor who's also acting as Cresvale's receiver. In October, the Securities and Exchange Surveillance Commission alleged Cresvale "bribed" buyers of the funds, "provided falsified information related to securities and other trading," "submitted false reports to customers" and lent money to buyers of securities it had underwritten. "I have never seen violations on this scale by a single company," an SESC official said at the time. Cresvale last month said it would file a criminal complaint against Martin Armstrong _ chairman of parent company Princeton _ and three others at Princeton and its custody agent Republic National Securities in connection with their roles in administering funds raised through Princeton notes. Armstrong faces charges in the US of defrauding Japanese corporate investors of about US$1 billion (HK$7.7 billion) through their investments in Princeton notes. (Hong Kong Standard 22-Dec-1999) DAIICHI CHUO KISEN: Stock trading at all time low ------------------------------------------------- The stock of Daiichi Chuo Kisen Kaisha (9132) posted 55 yen for the fourth straight trading day. The level matches the all-time low it recorded on Nov. 11. The company's top shareholders are Mitsui O.S.K. Lines Ltd. (9104) and Sumitomo Metal Industries Ltd. (5405). As one of Japan's three midsize shipping companies, it operates tramp ships and ore carriers. However, due to poor freight rates for its smaller ships, rising fuel costs, and a strengthening yen, there are few positive incentives on the earnings front. The stock has been unable to absorb the small-lot selling coming from domestic and foreign investors. Daiichi Chuo Kisen launched a restructuring program this fiscal year. It aims to shrink unprofitable operations, reduce its group work force by 10% and withdraw from foreign outposts. The associated one-time charges are about 3.9 billion yen, but the company expects a future earnings improvement of 3.6 billion yen. For the first half of the fiscal year, the company posted a deficit that was wider than initially expected. It hopes to show a slight pretax profit for the second half, but for the full year ending March 2000 the company will likely report a net loss of 3.5 billion yen. The company's shares are currently trading at below book value, but an analyst of Dresdner Kleinwort Benson (Asia) Ltd. says that this cannot serve as a standard for judging whether Daiichi Chuo Kisen shares are overpriced or if they are worth more than their current price. It will be hard for the stock to stage much of a rebound until some improvement in the company's fundamentals becomes apparent. (Nikkei 22-Dec-1999) NISSAN DIESEL MOTOR CO.: Nissan, banks to inject 10B yen -------------------------------------------------------- Nissan Motor and Renault have negotiated a debt restructuring plan for Nissan Diesel, an important step in attempts to secure the troubled truckmaker's financial future. Nissan Motor Co. (7201) and four Japanese banks announced Tuesday that they will pump as much as 10 billion yen into Nissan Diesel Motor Co. (7210), the ailing truckmaker saddled with groupwide debt of 500 billion yen. Under the rescue package drafted by Nissan, Renault SA, Industrial Bank of Japan (8302), Fuji Bank (8317), Asahi Bank (8322) and Yasuda Trust & Banking Co. (8404), Nissan Diesel will receive support on the financial and business fronts. Nissan and the bank group are expected to buy 10 billion yen worth of convertible bonds or other forms of securities to be issued by Nissan Diesel. In addition, the banks will set up a four-year credit line of up to 240 billion yen for the truckmaker. The aid plan also calls for capital gains of about 100 billion yen from securitization of an assembly plant in Saitama Prefecture and real estate sales -- which will be used to pay down Nissan Diesel's interest-bearing debt. On the business front, Nissan Diesel will tie up with Renault's commercial vehicle subsidiary, RVI, and the two companies will supply each other with key components, share a sales network, and promote cooperation in R&D. In addition, Nissan, Nissan Diesel and RVI may join forces in procuring parts. In July, Renault took a 22.5% stake in Nissan Diesel, propelling the French automaker to the top shareholder position along with Nissan. After scrutinizing Nissan Diesel's books, Renault identified the truckmaker's mounting debt as "problematic," and tie-up talks have since stalled. Details of the rescue package will be worked out by the end of January 2000. Patrick Faure, chairman of Renault VI, the French group's truckmaking unit, said there was "a lot to do for the company itself to become profitable." Mr Faure also made clear that Renault VI was pursuing opportunities in Asia. Nissan Diesel was one answer, but there was also "a possibility of co-operation" with a Korean manufacturer. Renault VI had held talks with Samsung and Daewoo. Mr Faure indicated that Renault VI, with Renault, was starting to look for development opportunities in China. Nevertheless, Renault welcomed yesterday's agreement between Nissan Diesel and four Japanese banks, led by the Industrial Bank of Japan, to provide the Japanese truckmaker with a four-year credit line worth about �200bn. In addition, Nissan Diesel will receive a capital injection worth �10bn, most likely by issuing convertible bonds and possibly new shares. Nissan Motor and the banks will likely buy these bonds - a move that could result in its shareholding in the truckmaker rising above that of the French carmaker. Mr Faure said that, if the restructuring proved successful and enabled the French manufacturer to work in depth with its Japanese counterpart, annual synergies of more than $200m might be realised from purchasing and product co- operation. He raised the prospect of distribution agreements allowing the cross-selling of Nissan Diesel and Renault VI products through each other's dealership networks. Yesterday's plan laid to rest immediate concerns about Nissan Diesel's financial stability. If the restructuring fails to allay Renault's concerns, it could pave the way for a tie-up with another truckmaker. DaimlerChrysler, the US-German group, which early this year withdrew its bid to buy part of Nissan Diesel, recently expressed renewed interest. Nissan Diesel is expected to launch another restructuring, which should include sales of non-core assets, in April. The group's main banks - IBJ, Fuji Bank, Asahi Bank, and Yasuda Trust & Banking - are understood to have initialled the scheme, and agreed to postpone collection of �230bn in outstanding loans, according to Japanese press reports. Nissan Diesel is expected to finalise details of its collaboration with Renault VI, the French carmaker's commercial vehicles arm, early next year. Nissan Diesel shares were up �15 (15 per cent) to �115. But some analysts were sceptical about the truckmaker's long- term prospects. "I don't think they have solved much with this credit line," said Tsuyoshi Mochimaru, analyst at Dresdner Kleinwort Benson. "It looks like a rescue attempt to me." (Nikkei, Financial Times 22-Dec-1999) ========= K O R E A ========= DAEWOO CORP.: Court receivership in the picture ----------------------------------------------- The government and domestic creditors of the Daewoo Group are likely to apply for court receivership of Daewoo Corp. next week, if its foreign creditors turn down a debt buyout proposal, a senior government official said yesterday. "If it is clear that Daewoo's foreign creditors will not accept the proposal, there is no reason to delay placing Daewoo Corp. under court receivership any longer," the official said. The foreigners creditors, however, have yet to deliver their official position on the debt buyout proposal, he added. If foreign creditors officially reject the proposal, it seems certain the government and domestic creditors will file for the Daewoo unit's court receivership next week, he said. Foreign creditors' refusal would be viewed as an attempt to maximize their interests as workout programs for 12 Daewoo companies are hammered out. Government officials have warned foreign creditors that if they do not agree to the debt buyout package, key Daewoo units, including Daewoo Corp., could be put under court receivership, causing them even greater losses. In Korea, a financial freeze is imposed on a company when it is placed under court receivership. His remarks came after Daewoo's foreign creditors yesterday turned down the debt buyout proposal for the collapsed conglomerate. In a statement, the committee of foreign bank creditors said the debt buyout proposal is unacceptable because it is based on inaccurate financial data. "The committee cannot accept the buyout proposal as it was proposed by the Daewoo advisors because it was based on a valuation model derived from the future cash flow of the Daewoo Group companies put under workouts," it said The committee said debt workout plans drawn up by domestic creditors are based on inaccurate financial data and the future cash flow predictions are unreliable. The buyout proposal also fails to reflect the fact that Daewoo Group companies have operated as a single economic entity. "Daewoo Group companies have operated as a single economic entity in respects of funding and management," the committee claimed. As a result, a substantial portion of Daewoo Corp.'s (and its overseas subsidiaries) borrowing was used to support the funding of other Daewoo affiliates, it contended. "Without giving due consideration to that fact, the buyout proposal will bring an outcome which is unreasonably disadvantageous to the foreign creditors of Daewoo Group companies and the equity among the creditors will be seriously disrupted," it maintained. The committee further noted that foreign creditors and their advisors have not been given sufficient access to information on the group's financial status. The committee urged the government and domestic creditors to provide a realistic solution which all the foreign creditors find reasonable. Meanwhile, a final due-diligence report on Daewoo Corp. showed that its creditors would assume an additional 2.8 trillion won ($2.48 billion) in loan losses. Compared to the results of an interim audit, Daewoo Corp.'s assets decreased 800 billion won, while its liabilities increased 2 trillion won, the report showed. (Korea Herald 23-Dec- 1999) DAEWOO GROUP: Foreign creditors reject debt rescheduling -------------------------------------------------------- As expected, Daewoo Group's 200 foreign creditors yesterday flatly rejected the government's proposal for debt rescheduling, pushing its financial arm Daewoo Corp. closer to liquidation. In a December 20 letter, the Foreign Bank Steering Committee said "it can not accept the Buyout Proposal (for $5 billion foreign debt)" from Daewoo Group's financial advisors. With the government-masterminded proposal for Daewoo Group's foreign debt rescheduling turned down by the overseas banking community, the decision is now in the hands of Seoul's financial authorities. That means the government now has to decide between placing Daewoo Corp., the financial arm of the group, under court receivership, or coming up with the revised plan with reflecting foreign banks' views. The December 20 letter stated, "The Committee cannot accept the Buyout Proposal as it was proposed by the Daewoo advisors. The Committee is hopeful that each of the parties involved in the restructuring of Daewoo Group companies and the Korean government may fully reconsider (the plan) and provide a realistic solution." Daewoo Group's financial advisors, along with the government, offered a proposal on Dec. 10, imposing a 76.7 percent loss ratio on Daewoo's foreign debts. That means Seoul will repay 23.3 percent of Daewoo's foreign liabilities in cash should foreign banks agree to take a 76.7 percent haircut for their loans in Daewoo's four major business units. Rejecting the offer, the Foreign Bank Steering Committee said the proposal "fails to reflect the fact that Daewoo Group companies have operated as a single economic entity. Daewoo Group companies have operated as a single economic entity in respect of funding and management. The Committee is of the firm view that any plan which does not take into account the single-entity nature is fundamentally flawed," the letter stated. Simply put, overseas lenders argue there should be no difference in loss ratios between their loans in Daewoo Corp. and Daewoo Heavy Industries, for example, as the group is considered "one single economic entity." They have claimed that an 82 percent loss for Daewoo Corp. debt, in particular, much higher than the ratios imposed on other business units, is unacceptable. The Steering Committee also argued foreign banks could not trust the financial information provided by Daewoo and its financial advisors. "The buyout plans derived from future cash flow and domestic workout plans of Daewoo companies. The past financial statements of Daewoo Group companies which did not reflect the major off-balance sheet transaction items amounting to multi-billion dollars are not accurate at all," the Dec. 20 letter said. Earlier the British Finance Center disclosed the deals in which Daewoo Corp. transferred a huge amount of funds to other subsidiaries through its London account. On information sharing, the Steering Committee argued Daewoo's financial advisors failed to provide all relevant sources to foreign banks, discriminating against them in favor of local creditors. "Notwithstanding the repeated requests by this Committee and the assurance from the government, the Committee has never been able to be granted sufficient information access," the letter stated. Meantime, Daewoo said in response that foreign banks need to present counter-proposals rather than just pointing out the flaws of the Korean offer. "We are not sure if this (Dec. 20 letter) is the final message from foreign creditors. Also we need to have the counter-proposals from foreign banks. Until then there is nothing Daewoo can do," said Moon Ki-hwan, Daewoo Corp. spokesman. (Korea Times 22-Dec-1999) DAEWOO GROUP: Seen as setting market direction ---------------------------------------------- Redemptions, year-end booking closings and possible breakthrough deals involving the disintegrating Daewoo Group will drive South Korean shares this week. Investors will be watching closely if talks about selling unlisted Daewoo Motor to General Motors Corp make headway, analysts and fund managers said. "The market to an extent reflects the near-closing of the deal," said Paulo Rhee, deputy head of research at HSBC securities. "But if a final contract is signed, it may boost up the market." The market could also see further volatility as investment trust companies sell shares to handle redemptions of equity-linked beneficiary certificates. That may be offset by bargain hunters who expect the market to turn bullish again at the beginning of the year, they said. The Korea Stock Exchange closed on Friday at 949.26 points, up 0.69 points or 0.07 percent, as investors snapped up blue-chips that had fallen after heavy selling last week. The benchmark Korea Composite Stock Price Index dropped 68.91 points or 6.76 percent on the week. Market watchers expected the index to range between 950 and 980 points this week. "The redemptions faced by investment trust companies will be a key factor in what direction the market go," said Kim Dong-uk, a strategist at Daishin Securities. Investors, who poured money in funds managed by investment trust companies when interest rates fell, are re-aligning their portfolios as the year end approaches, he said. Analysts attributed last week's heavy volume on Daewoo shares to the potential GM deal and talks between advisers of Daewoo Group and its foreign creditors over a possible buyout of Daewoo's $6.7 billion in foreign obligations. The government said it wants to see a deal to sell Daewoo Motor soon because a delay would erode the company's asset value. "A final deal would especially increase international investors' confidence in the country's corporate restructuring," said Rhee from HSBC. Many analysts said foreigners would sell shares or reduce buying as they get ready to close their books earlier than usual as a precaution against any millennium bug problems. "Foreigners may significantly decrease or stop buying," said Hwang Sung-taek, a fund manager at IMM Asset Management. Also, the strengthening won might dissuade foreign investors from buying shares, because their depreciated dollars made local shares more expensive, analysts said. Blue-chip and selected technology stocks would likely see some gains from bargain hunters, analysts said. "Blue-chips and large-cap telecommunications stocks were heavily hit when the KOSPI dwindled," said Yoon Sam-wi, a strategist at LG Securities. "They may recuperate this week." SK Telecom and Samsung Electronics, were still undervalued and could gain some more, analysts said. SK closed on Friday at 2,799,000 won, up 174,000, while Samsung ended the day up 6,000 won at 245,000. (China Daily 22-Dec- 1999) DAEWOO MOTOR: Hyundai gets ear of FSC official versus GM -------------------------------------------------------- At the same time, Hyundai Motor Co., flagship of Hyundai Group, passed a significant milestone in its bid to prevent General Motors Corp. from taking over Daewoo Motor Co. when a key government official indicated he would go along with proposals to sell Daewoo Motor at auction. Hyundai Group won an interim victory when Lee Hun Jai, chairman of the Financial Supervisory Commission, appeared to reverse his view that General Motors should have exclusive bidding rights for Daewoo Motor. After Hyundai objected strongly, Mr. Lee, in a television interview, called for disposing of Daewoo "in a fair and transparent way." A spokeswoman for the supervisory commission, Sandy Park, said Mr. Lee might favor a "limited auction" - one that was limited to a few companies - but did not say whether Hyundai might be among them. (International Herald Tribune 21-Dec-1999) DAEWOO MOTOR: Creditors setting up auction situation ---------------------------------------------------- Korean creditors of Daewoo Motor said yesterday that they will put the ailing Daewoo Motor on the block for an international tender to select a priority negotiator by March next year. "The international tender will be of a limited scale in order to prevent the process from stalling," a senior official of main creditor Korea Development Bank said. Request for proposals will be sent to General Motors (GM), Ford Motor, DiamlerChrysler, Hyundai and Samsung Groups. Bidders are required to submit their letter of intent based on the outcome of the creditor-initiated due diligence report. Meanwhile, GM hinted that it might forsake its bid for Daewoo Motor that has assets of over 18 trillion won against debts of more than 12 trillion won, should it have to buy the troubled Korean car maker excluding its most successful overseas operations in Poland. During a telephone interview, Lee Ki-sop, representative of GM Korea, a subsidiary of the American car maker, said, "The decision to take over the entire domestic operations of Daewoo Motor and most of its overseas plants was made at our board of directors' meeting. The sale of the Poland factory to Hyundai would cause a major change in our intention to buy Daewoo." In a statement directly referring to Hyundai's declaration of its intention to take over Daewoo's Polish plant, known as FSO, GM said, "We have offered to buy Daewoo Motor including FSO and we won't consider taking over Daewoo Motor excluding FSO. As in the cases of the sale of Hanbo Steel and Korea First Bank, the longer the process is dragged out, the more uncertainty looms at the cost of attractiveness (Daewoo Motor has)," GM said in its statement. FSO, one of 11 overseas plants belonging to Daewoo, is capable of producing 270,000 units per year. It is said that Daewoo's attempt to expand into Eastern Europe was one of the reasons precipitating the breakup of the two former allies in 1992. In 1995, Daewoo acquired the FSO, beating competition from GM. GM's statement came on the heels of a declaration made by Hyundai Motor, Korea's biggest auto maker and owner of Kia Motors, that it is opposed to the takeover of Daewoo Motor by GM and it is willing to buy FSO particularly. Hyundai fears a backlash of the bigger GM's advance into Korea through the acquisition of its rival Daewoo Motor which accounts for one third of the domestic market share with the rest more or less under Hyundai's control. According to its internal report, Hyundai might lose half of its domestic market share, a loss that it believes could make it impossible for the company to survive on its own. GM, which had been sitting on its hands for the past two years of an exclusive negotiating period for the takeover of Daewoo Motor, has quickened its move to take over Daewoo amid reports that its rivals - DiamlerChrysler and Ford Motor - have expressed their interest in participating in an international tender for Daewoo Motor. GM's international rivals are also anxious to boost their base in Asia, something that Daewoo Motor might offer. GM has asked for an extension of the exclusive negotiating rights for the purchase of Daewoo Motor in a request contained in its letter of intent to the government's top regulators. (Korea Times 21-Dec-1999) HYUNDAI PIPE: Bank helping to sell shares for debt relief --------------------------------------------------------- Bank of Tokyo-Mitsubishi, Japan's largest lender, said it agreed to arrange the sale of new shares of Hyundai Pipe to allow South Korea's No 1 pipe maker to raise $160 million to repay debt. The bank said its Hong Kong unit would act as an intermediary in soliciting new investors this week on the sale of new shares from Hyundai Pipe. It contradicts an earlier announcement by Hyundai Pipe saying the bank was an investor in the company. "The Bank of Tokyo-Mitsubishi won't participate in this transaction as an investor," the bank said. In its statement, Hyundai Pipe said its major shareholders _ Hyundai Motor, Hyundai Heavy Industries and other Hyundai Group affiliates - won't take up the new shares. After the rights offering, buyers of the new shares will have a 39 per cent stake in Hyundai Pipe, topping the combined 29 per cent stake owned by Hyundai units. The move is to shore up finances, Hyundai Pipe said. "Our debt leverage will be lowered to 1.5 times our equity after the rights offering." It's part of the restructuring effort by parent Hyundai Group, which must sell some units to meet a debt-to-equity ratio of less than 200 per cent set by the government for large companies. Hyundai Pipe expects sales to double to 1 trillion won (HK$6.842 million) this year from last year, though it expects to reverse to a loss because of rising interest rates and spending on new factories. The company had 1.6 trillion won of debt as of June, 2.8 times more than its equity. The economy, which slid into its worst recession in four decades last year, is expected to expand 9 per cent this year and 6.5 per cent next year, according to the Organisation for Economic Co-operation and Development. Hyundai Pipe shares have dropped 75 per cent so far this year to 6575 won. (Hong Kong Standard 21-Dec-1999) KOREA HEAVY INDUSTRIES: Loses $2 million order over strikes ----------------------------------------------------------- General Electric (GE) of the United States cancelled a power plant manufacturing order placed with Korea Heavy Industries and Construction (Hanjung), deeming that the state-run firm cannot keep its delivery dates for ordered parts due to ongoing strikes by Hanjung's labor union. According to the Ministry of Commerce, Industry and Energy Tuesday, GE sent a letter to Hanjung's US branch, informing the cancellation of its gas turbine parts order worth about US$2 million and suspending all advance payments. GE also advised Hanjung to take legal actions to ban labor union's actions that undermine the delivery of ordered products. Sources said GE and Hanjung have been moving ahead in negotiations to supply about US$1.5 billion in power generation equipment, but this negotiation is in jeopardy since GE cancelled its recent orders. GE placed orders amounting to about US$170 million with the state-run heavy equipment manufacturer, but the US firm is known to have switched to Japanese firms Toshiba and Hitachi for the same order. (Digital ChosunIlbo 21-Dec-1999) KOREA LIFE INSURANCE: Sues J.P. Morgan & Co. over losses -------------------------------------------------------- Korea Life Insurance Co. is suing J.P. Morgan & Co. for as much as $1 billion, two months after the fourth-largest U.S. bank settled multiple lawsuits with several South Korean financial institutions over derivatives losses. Korea Life's actual losses, though, add up to less than a tenth of the figure in the lawsuit filed by Korea Life and a subsidiary against Morgan Guaranty Trust Co., the largest affiliate of J.P. Morgan. The move suggests that South Korea's third-largest life insurer is rethinking its strategy. It was the only one of nine South Korean financial institutions to accept J.P. Morgan's January 1998 proposal to restructure its derivatives transactions. The rest chose legal action against Morgan. "J.P. Morgan's misdeeds were proved in recent settlements with other Korean financial institutions," Korea Life Insurance said. "We'd also like to prove and recover our losses." A spokesman for Morgan Guaranty called the lawsuit "wholly without merit." The dispute underscores the difficulties in resolving the series of interlocking and highly leveraged bets on Asian currencies that blew up when the Thai baht plunged in July 1997. Since January 1998, the baht has risen by one-third from its low point against the dollar, and the South Korean won has doubled in value. Mainly because of its soured trade with Morgan, Korea Life was declared insolvent Sept. 14 with debts exceeding its assets by 2.7 trillion won ($2.38 billion). Korea Life said it was seeking to recover a total of $90 million in losses, including investment principal. When it agreed to settle the transaction with J.P. Morgan in January 1998 - at the height of the currency crisis in Asia - it paid Morgan $13 million. Morgan agreed to roll over Korea Life's $50 million loss at a high rate of interest until Jan. 30, 2000. Morgan also allegedly "misled the company to guarantee its debt," Korea Life said in its statement. Court papers filed Monday in U.S. District Court in Manhattan allege that Korea Life and its subsidiaries, in establishing their derivatives positions, had relied on statements from Morgan traders that the baht would remain stable when in fact the traders knew it would soon collapse. The lawsuit also charges that Morgan Guaranty plotted to destabilize the currency so that Morgan would profit, even though it knew that a currency crisis would cause "massive losses" to investors. (The International Herald Tribune 22-Dec-1999) ===================== P H I L I P P I N E S ===================== MONDRAGON INT'L PHILIPPINES: High court rejects CDC block --------------------------------------------------------- The Supreme Court has dismissed Mondragon Leisure and Resort Corp.'s (MLRC) petition to suspend the lower courts from upholding Clark Development Corp.'s (CDC) right to takeover the 215-hectare Mimosa Leisure Estate in Clarkfield, Pampanga. The motion -- issued by the third division of the High Tribunal -- gives the government-owned corporation the right to legally own and operate the disputed leisure complex. "The Court, finding that petitioners (MLRC) failed to show that grave abuse of discretion had been committed by the Court of Appeals in denying the temporary restraining order prayed for, resolved to dismiss the petition," the Supreme Court said in a ruling dated December 13. To recall, the Angeles Regional Trial Court issued a writ of execution for CDC to takeover Mimosa based on the compromise agreement signed by the government firm and MLRC in June. Under the agreement, MLRC was tasked to pay CDC with 325 million Philippine pesos (US$8 million at PhP40.572:US$1) in overdue rentals. Failure to do so would mean MLRC will have to abandon and turnover the property to CDC. The renegotiated contract -- signed in July 28 -- requires MLRC to pay arrears in six tranches beginning August. MLRC was also required to provide CDC a letter of credit from bank creditors to guarantee payments will be made. However, none of these was delivered. The government corporation earlier said it will accept proposals from interested investors keen on the Mimosa estate. In an earlier interview, CDC president and chief executive officer Rufo Colayco said their next move is to negotiate with private parties who will take the place of MLRC. He added it would be useless negotiating for another round of settlement talks with MLRC. Earlier, MLRC said a $200- million loan has been granted to MLRC by a California-based trust firm. The money will reportedly be remitted in January 2000. (Business World 22-Dec-1999) NATIONAL STEEL CORP.: Court stops asset foreclosure action ---------------------------------------------------------- The Regional Trial Court of Lanao del Norte has restrained the creditor-banks of National Steel Corp., led by Philippine National Bank, from foreclosing the assets of the debt-ridden Iligan-based steel mill. The RTC issued the 72-hour TRO in response to the complaint filed by NSC last Dec. 16 claiming that the foreclosure of these assets would "cause great or irreparable injury not only to NSC but also to the national economy. The foreclosure of NSC's plant and other assets will lead to the permanent cessation of its operations, thereby foiling the prospective infusion of fresh capital from new investors and completely derailing the rehabilitation and debt-repayment plan of NSC," NSC said. PNB, as trustee, has scheduled a public auction yesterday of NSC's mortgage assets including a parcel of land located in Iligan City as well as the plant, machinery and equipment, building facilities and other improvements. PNB was poised to foreclose NSC's mortgaged assets as early as August this year after it declared NSC in default for failure to pay its obligations under the mortgage trust indenture. The MTI was entered into by NSC and the banks last June 29, 1990. NSC's debt under the MTI was placed at P9.9 billion as of Sept. 30, 1999 excluding interest, penalties, and other charges and expenses. NSC admitted that it has huge obligations with the banks but denied that it was in default, thus, there was no basis to foreclosure the mortgaged properties. NSC claimed that its difficulties in meeting its obligations under the agreement were caused by factors beyond its control such as the reduction of tariffs on steel products under the World Trade Organization, fluctuation in foreign exchange rate and soaring interest rates at the height of the Asian crisis. NSC said the country's accession to the WTO resulted in a substantial reduction in tariff rates on imported steel products, leading to the proliferation and dumping of cheap Korean and Russian steel products. NSC added that the steep peso depreciation caused raw materials costs to be higher than the selling price of finished products while the hike in interest rates to as much as 38 percent increased the burden of servicing its obligations with creditor banks. "The circumstances constitute supervening events which have rendered the strict performance of NSC's obligations under the MTI impossible. Considering the situation, NSC is not in default," NSC said. (Philippine Daily Inquirer 22-Dec- 1999) PHILIPPINE NAT.BANK: Concerns about Tan stake acquisition --------------------------------------------------------- The Federation of Philippine Industries (FPI) is initiating a move questioning the recent purchase by businessman Lucio Tan of a 35% stake in the Philippine National Bank (PNB). FPI president Antonio Garcia raised this concern during a meeting of the Economic Mobilization Group (EMG), a joint government-private sector quick-response body on economic affairs. "Mr. Garcia informed the group that he was told that an individual identified with the President (apparently referring to Mr. Tan) is going to take over control of a bank (PNB) where he is one of the biggest borrowers(s)," stated an EMG report. Mr. Garcia's concern was that the "act (may) erode the value of government's ownership in the bank" and that this perception may later discourage foreign businesses from investing in local banks. At present, the government owns 30% of the bank while the rest of shares are owned by minority shareholders. An EMG member who refused to be named told reporters yesterday that some members of the group found nothing legally wrong with Mr. Tan's stake in PNB. Notwithstanding this, the group agreed to allow FPI to provide the workings of the memorandum for the President that will articulate "the concern of the private sector on the actions by an individual which has close ties with Malaca�ang." The EMG source clarified FPI's concern is not on the legality of the action but more on its propriety and the message it will send to the international business community. It will be noted the Philippine Airlines, Inc., controlled by Mr. Tan, is among the largest borrowers of PNB. There have been questions on whether this will involve a violation of the government rule limiting loans extended to bank's directors, officers, shareholders, and related interests (DOSRI). The EMG secretariat will consult the Bangko Sentral ng Pilipinas (Central Bank of the Phils.) on this matter and will attach its findings in the memorandum to be submitted to President Estrada. ((Business World, Philippine Daily Inquirer 21-Dec-1999) PHILIPPINE NATIONAL BANK: Central banker defends Tan stake ---------------------------------------------------------- Tobacco and beer magnate Lucio Tan cannot protect his assets in Philippine Airlines (PAL) simply by gaining a controlling stake in semiprivate Philippine National Bank (PNB), as the bank's exposure to the airline was part of a larger international consortium, said the Bangko Sentral (Central Bank of the Phils.). "PAL's loan is under a rehabilitation plan of which PNB is only a part of the consortium that loaned the money," Bangko Sentral Gov. Rafael B. Buenaventura yesterday told reporters. "They are bound by the loan agreement that they signed on the plan." He said any revisions that Mr. Tan -- as owner of PAL -- may choose to make in the existing loan agreement must go through the scrutiny of other members of the consortium, composed mainly of foreign creditors. PAL's foreign creditors include the US Export-Import Bank, the European Credit Agency, and Chase Manhattan Bank. Locally, the airline's top creditors are PNB and Allied Banking Corp., also owned by Mr. Tan. Mr. Buenaventura said it was unlikely that other creditors would agree to amendments in the loan agreement that would give one bank, such as PNB, an undue advantage. "The entry of Mr. Tan will not change the terms and conditions under that rehabilitation plan," he said. "Assuming there's going to be a need to change (it), it's not just PNB that can be party to it. It has to be all the creditors, of which the local creditors represent a very small part of. The notion that he bought into PNB to protect PAL is nonsense," he added. The Bangko Sentral chief also said regulators are studying the implications of PNB's loan exposure to the airline now considered as loans to directors, officers, stockholders, and related interests (DOSRI). Central bank regulations limit DOSRI loans to 15% of a bank's total loans. PNB's exposure to PAL -- estimated at 2.8 billion Philippine pesos (US$69 million at PhP40.572:US$1) -- amount to less than 3% of PNB's total loan book. Mr. Buenaventura was reacting to news reports that the Federation of Philippine Industries (FPI) has questioned the entry of Mr. Tan into PNB, saying that it "may erode the value of the government's ownership in the bank" as it could discourage other strategic investors from buying into PNB. "It was not a crony deal because he bought his share on the open market at a premium to the prevailing price then," Mr. Buenaventura said in defense of the deal. (Business World 22-Dec-1999) ================= S I N G A P O R E ================= DEMAGA RINGKASAN TRADING: Loses stake in company for debts ---------------------------------------------------------- Inno-Pacific Holdings, which runs restaurant chains such as Shakey's, said it has taken over a 50 per cent interest in a US company which owns 450 acres of property in Seattle as compensation for a loan it had extended earlier. Malaysian firm Demaga Ringkasan Trading, which owned the interest in the US company formerly, had said it could not repay its $7.5 million debt, inclusive of interest, to Inno-Pacific. (Straits Times 22-Dec-1999) FHKT HOLDINGS: Narrows losses ----------------------------- Fruit and vegetable distributor FHTK Holdings has narrowed its interim losses to $26.2 million from $30.9 million, thanks to a drop in the cost of certain types of produce. And for the full-year, the company is optimistic that it will improve on last year's performance. FHTK last year posted a massive $81 million loss, dragged down by rotten bananas and garlic. Turnover for the half-year ended Sept 30 shrank by about 20 per cent to $51.6 million from $64.9 million. FHTK explained that its trading activities were constrained by a lack of capital as it had agreed to a standstill arrangement with its banks. In addition, sales of pears fell 58 per cent, while the selling price of garlic dropped 45 per cent. But FHTK said margins showed "marked improvement" mainly because of the lower cost of certain types of produce. During the period, the group also made an extraordinary gain of $2.37 million from the sale of a property in Kee Seng Road. This brought bottom-line loss to $23.8 million. Loss per share came to 6.93 cents, lower than last year's 8.45 cents. Net tangible assets per share plummeted by two-thirds to 8.34 cents from 25.4 cents. No dividend was declared. The company expects demand for its core produce to increase as the global economy improves and its new dehydration plant in Tai'an, China, is expected to contribute to sales. On top of this, FHTK will continue to trim overheads and inefficiencies. The company announced in September that it would raise $43.5 million from a rights issue and that part of the money would be used to repay bank borrowings and provide "much-needed working capital to finance an increased volume of business". FHTK is also in the midst of finalising a debt restructuring proposal with its financial advisers. The successful restructuring of its bank debts should bring along interest savings, and to facilitate the plan, FHTK has extended its standstill agreement with its bankers for another month to Jan 20. Mainboard-listed FHTK said its performance was affected by a standstill agreement signed with banks in June, which had limited its access to credit facilities. As a result, its trading activities were constrained by a lack of additional working and long-term capital. However, gross margins showed a "marked improvement" over the previous period, thanks to lower costs for certain produce, FHTK said in a statement. During the period, it also enjoyed an extraordinary gain of $2.37 million from the disposal of its investment property at Kee Seng Street. The proceeds were used to repay bank loans. It noted that the global economy was "showing signs" of recovery and it expected an increase in demand for its core produce. In its latest balance sheet, group current liabilities came to $233.8 million, compared to just $135.4 million in current assets. (Business Times, Straits Times 22-Dec-1999) =============== T H A I L A N D =============== BANGKOK METROPOLITAN BANK: Struggles with interest spread BANK THAI: Struggles with interest spread RADANASIN BANK: Struggles with interest spread --------------------------------------------------------- Bangkok Metropolitan Bank (BMB)'s net interest spread dipped into the negative at 0.84 per cent for the first nine months of this year. Its interest expense for deposits was higher at 4.61 per cent than interest income from loans at 3.77 per cent. Under the able leadership of Somchai Sukulsurarat, BMB has been the most successful state-owned bank in restructuring loans. BMB recently started to offer only a 3.25 per cent interest rate for savings accounts, down from 3.5 per cent. BankThai (BT) also had a negative interest rate spread of 1.41 per cent in the first nine months of this year with interest on loans of 2.18 per cent falling behind interest on deposits of 3.59 per cent. The meagre performance of its loan portfolio is not surprising considering it was formed from the merger of Union Bank, Krung Thai Thanakit Finance and 12 other troubled finance companies brimming with non- performing loans. BT depends on interest and dividends for fully 92.80 per cent of its total income, the highest percentage in the banking system. BT is concerned that its non-performing loans will proliferate and cause more trouble for the government in the future. However, the government has overlooked this small state-owned bank because it is preoccupied by all the problems and adverse publicity surrounding giant Krung Thai Bank, another state-owned bank. BT lowered -- by 0.25 per cent -- three-month and six-month time deposit rates to 4 per cent and the 12-month rate to 4.25 per cent, effective Dec 8. Radanasin Bank (RSB) suffered the greatest negative interest rate spread at 2.25 per cent. Its loan interest stood at only 1.78 per cent compared with 4.03 per cent interest on deposits. It had to carry the burden of bad loans that were transferred from Laem Thong Bank at the order of the Ministry of Finance. Interest and dividend income made up almost 88 per cent of RSB's total income while non-interest income accounted for the rest. After United Overseas Bank (UOB) of Singapore won the bidding for the bank, it has been busy finding ways to rehabilitate it. (The Nation 22-Dec-1999) NATIONAL FERTILISER CO.: Completes debt-for-equity swap ------------------------------------------------------- Krung Thai Bank yesterday said it has acquired 108.4 million shares of state-owned National Fertiliser Plc (NFC) at Bt5 per share in a swap of debt for equity, as part of the latter's debt restructuring. Krung Thai Bank now holds 8.5 per cent of NFC. (The Nation 21-Dec-1999) PETROLEUM AUTHORITY OF THAILAND: Rehab plan okay near ----------------------------------------------------- The Petroleum Authority of Thailand (PTT) board appears close to endorsing a planned reorganisation in line with restructuring and privatisation of the state energy firm. The new structure would divide the PTT's businesses into three key groups-oil, natural gas and petrochemicals-with the creation of a holding company, said PTT governor Viset Choopiban. PTT Holding Co would be owned 20% by the public under an initial public offering planned for the second half next year. The PTT's stakes in several subsidiaries and affiliates would also undergo changes. Certain companies would be merged under the operational umbrella of the PTT. Oil procurement would be merged with Thai Oil Co's refining operation, while the retail oil business would be incorporated with that of Thai Petroleum Pipeline, an oil pipeline operator. The natural gas trading operation would be grouped with PTT Exploration and Production Plc, while the marketing of natural gas would be combined with Thai Petroleum Pipeline. The operation of Thai Olefins Co and The Aromatics Thai Co would be merged. The PTT would sell its entire stakes in three other oil refinery subsidiaries. They are 24% in Bangchak Petroleum Plc, 36% in Rayong Refinery Co and 36% in Star Petroleum Refining Co. (Bangkok Post 21-Dec-1999) PIZZA PLC: Suing franchisor for $180 million on non-comp ag ----------------------------------------------------------- Thai Pizza Hut franchisee Pizza PCL is claiming more than $180 million in damages from giant Tricon Global Restaurants Inc. and its affiliates in a battle over contract-renewal rights that has potential repercussions for the U.S. based group's franchises worldwide. At the heart of the dispute is a noncompetition clause that Tricon wants to introduce into its franchise agreement. The clause would bar Pizza from operating new food business that compete with Tricon in Thailand or anywhere else in the world. "It's a key battle for both of them," said Youseef Abboud, an analyst with SG Asia Credit Ltd. in Bangkok. Last week, the Thai fast-food chain filed a suit in New York's southern district court accusing Tricon of unfair competition, seeking to defraud Pizza and wrongfully refusing to renew its franchise, among other things. But Pizza has yet to serve its complaint on Tricon, said the Thai company's attorney, Andrew Seldon of Briggs & Morgan. "We've asked them to say whether they're interested in a settlement," he said. Tricon - which spun off from PepsiCo Inc. in 1997 - started to introduce a non-competition clause of franchisees two to three years ago, said Peter Hearl, executive vice president of Dallas-based Tricon Restaurants International, which is also named in the suit. Pizza's franchise requires it to renew on the prevailing current terms and conditions, he said. "We are not asking (Pizza PCL) to do anything we are not asking other new franchisees to do," he added. But the representative of another Asia-based Tricon franchise, who asked remain unidentified, said that the clause "has raised concerns about how Tricon is handling these issues" and appeared to mark a step back in relations with franchisees that had improved since the spinoff from PepsiCo. "They can compete with us but we can't compete with them," said Pizza PCL's chairman and chief executive, William Heinecke. Pizza's suit seeks a judgment that Tricon must renew its franchise on substantially similar terms and can't force Pizza to accept the noncompetition clause. In a notice to the Stock Exchange of Thailand, Pizza said it believes the clause is illegal under Thai law and violates fair businesss practice in the U.S. The company's legal action marks the climax of more than a year of negotiations between Tricon and Pizza over renewal of the Pizza Hut franchise in Thailand, which expiress Jan. 18. Pizza has held the Thai franchise in Thailand, which expires Jan. 18. Pizza has held the Thai franchise for nearly 20 years, becoming one of the biggest fast-food chains in Thailand. It has opened 116 Pizza Hut outlets, capturing an estimated 92% of the local pizza market. Pizza operates other franchises, including Swensen's, Sizzler and Dairy Cream, but last year derived more than half its operating profit from Pizza Hut. Negotiations suffered a setback in November when Pizza announced that it had acquired a chicken-restaurant franchise from Perth-based Australian Fast Foods that would compete with Tricon's Kentucky Fried Chicken brand. Pizza plans to invest $6 million opening 20 chicken outlets in the coming year, Mr. Heinecke said. He said the deal didn't violate the terms of his Pizza Hut franchise, adding, "if you're not in chicken you're missing the biggest segment of the market." Mr. Hearl of Tricon said that his company was "most surprised" by Pizza's announcement and that Pizza knew of the noncompetition clause required to renew its franchise. Pizza's lawyer, Mr. Seldon, replied that Tricon had known for "upwards of five years" that Pizza was interested in entering the chicken business. Relations between Tricon and Pizza slumped further after the U.S. group published advertisements in mid-November announcing "contingency plans" to build and operate Pizza Hut restaurants in Thailand if negotiations with Pizza weren't resolved. The advertisements presented a "factual release that wasn''t designed to do anything but communicate with potential suppliers and developers," Mr Hearl said. Mr. Seldon said the advertisements and damaged Pizza PCL's reputation and relationships with investors, creditors, employees and customers. In its suit against Tricon, Pizza PCL says the franchiser "employed a scheme to deraud" it, alleging the group "apparently never intended" to renew the franchise and wanted to operate the Thai Pizza Hut business itself. In addition to the noncompetition clause, it says Tricon imposed "unduly onerous and commercially unreasonable" conditions for the renewal with a demand that in the five years of the franchise it builds 105 new Pizza Hut restaurants at a cost of over $23.6 million. Mr. Heinecke indicated that Pizza PCL is allowing for the possibility of losing the franchise, telling the Stock Exchange of Thailand that the company expects "no significant change in our sales of profits over the short and long term if we decide to rebrand our pizza restaurants." Pizza's share price closed Monday at 59.50 baht ($1.56), 15% over its mid-December low point of 51.50 baht. But at SG Asia Credit Mr. Abboud saw the rise as "a very good opportunity to sell." Tricon, the world's biggest restaurant operator with more than 29,000 company owned and franchised restaurants worldwide, has the resources to build up a new Pizza Hut chain even if it must start from scratch, he said. But for Pizza, "Why lose the (Pizza Hut) brand name for an unknown chicken treat business?" Mr. Abboud asked. (The Asian Wall Street Journal 22-Dec-1999) SINO-THAI ENGINEERING CONST.: Files rehab plan ---------------------------------------------- Sino-Thai Engineering Construction Plc said that it has filed a petition for its rehabilitation plan to proceed under the bankruptcy law. According to a filing to the Stock Exchange of Thailand, the company expects the appointment of the panel to take place soon after the court accepts the petition. (The Nation 21-Dec-1999) SRITHAI SUPERWARE: Creditors approve rehab plan ----------------------------------------------- Srithai Superware's creditors have approved the company's debt reform plan, the company announced yesterday. Srithai Superware, Thailand's biggest maker of plastic kitchenware and plastic containers, said its creditors, representing 90.07 percent of debt, have approved the plan to restructure US$172 million in delinquent debt. Furthermore, the central Bankruptcy court is scheduled to make a final judgment on December 24. The announcement came seven months after the court approved a petition by Srithai to restructure its debt. Srithai Superware President Sanan Angubolkul said under the plan, creditors such as Citibank and Bank of America will convert half of the debt into a stake of about 86 percent, or US$88 million, in the company, while extending payment on the remaining debt by five years. He said the plan also calls for Srithai to sell its non-essential assets including land and buildings worth 600 million baht within the five year period. However, the creditors are only prepared to hold 57 percent rather than 86 percent, resulting in the plan being revised. The revised plan stipulates that six months after the court's formal approval of the plan, creditors will be allowed to sell 20 percent of the shares with condition that company's executives and existing shareholders have a priority in buying. The plan is also involved rescheduling the remaining debt for another five years with an interest rate of one per cent over the London Interbank Offering Rate (Libor). Srithai's debt restructuring is proceeding under the bankruptcy court. Andrew Dixon, an executive of Westdeutsche Landesbank, in Singapore, one of the company's majority creditors, said swapping a huge amount of debt to equity signifies creditors' confidence in Srithai's future prosperity. The Lertsumitkul family currently controls 61 percent of Srithai. Their stake will be diluted to 14 percent after the debt-to-equity swap. Sanan Aungubonkul, Srithai managing director, said the existing shareholders are ready to buy back if they have sufficient funding. He said the firm will benefit from the debt reform plan as its current interest burden will be reduced by half following the equity swap. The company will resume servicing its debts in the second quarter of next year after its capital increase plan is finished, he said. Srithai is confident about pursuing the plan because of the upward trend in the world plastic and melamine market and because it now has enough liquidity for operation, Sanan said. As per the company's balance sheet ended Sept 30, 1999, it was still in the red with a Bt992.92-million loss against the Bt976.75-million net profit over the same period last year. Its sales during the same period fell slightly from Bt2.29 billion to Bt2.62 billion. Srithai's is the first case taken up under the amended bankruptcy law. Wisit Wisitsora-at, director-general of the Legal Execution Department of the Central Bankruptcy Court, said that the amended law helps make consideration of debt restructuring easier and faster as calculation of the creditors' votes is now based only on debt portion, waiving head count. (Business Day, The Nation 21-Dec-1999) STECON: Court hearing on rehab Jan. 17 -------------------------------------- Senior Vice President, Finance and Account Mr.Woraphant Chonthong has reported to the Stock Exchange of Thailand (SET) that the compnay has a court hearing date of January 17, 2000 on its petition for rehabilitation. The appointment of a planner is expected to take place soon after the court accepts the petition, he further told the SET. (Stock Exhchange of Thailand 22-Dec-1999) TELECOMASIA CORP.: Debt deal nearing conclusion ----------------------------------------------- Metropolitan fixed-line operator TelecomAsia Corporation Plc (TA) is likely to sign a Bt63-billion debt restructuring agreement with its 45 foreign and local creditors today as requested by the Bank of Thailand (BOT). A source from the creditors said that it is possible that financial institution creditors would agree to supplier creditors' demands following intervention by the central bank. "The BOT has intervened in TA's case as they do not want the deal to be delayed further," the source said. The bank creditors had reportedly not yet reached their final decision at the time of reporting as the 300-page document had been submitted to them just a few days ago. Some supplier creditors reportedly want to change some conditions in the Memorandum of Understanding (MoU), particularly the terms of debt forgiveness. The demand is a major obstacle to completion of the restructuring plan. Among its supplier creditors are Mitsui/NEC, Tomain, and Lucent Technologies. As per the memorandum signed in October, total debt will be reduced to Bt56 billion from Bt63 billion. The secured creditors have agreed to extend repayment of Bt49.65 billion principal, with the first payment beginning in the second quarter of 2002 and the last payment to be made not later than the end of 2008. The unsecured loan of Bt13.46 billion will be fully retired with cash amounting to Bt5.61 billion and Bt6.71 billion worth of deferred promissory notes, plus a haircut. Funds for the debt settlement will come from Germany-based KfW, which will inject US$150 million of fresh funds into the heavily-indebted firm in exchange for a 24 per cent stake. KfW is among TA's major creditors. Other creditors include Bangkok Bank, Krung Thai Bank, Siam Commercial Bank and Thai Farmers Bank. Earlier, TelecomAsia hastened the signing of the debt- restructuring memorandum with its creditors to meet the Sept 30 deadline set by Corporate Debt Restructuring Advisory Committee to avoid getting dragged into a bankruptcy case even though it had completed the final details of the debt restructuring terms. In a separate deal, TA has already completed Bt8 billion debt restructuring with supplier creditors for the Personal Communication Telephones (PCTs). Debt forgiveness and rescheduling of the repayment period are crucial parts of the plan. Apart from TelecomAsia, its subsidiary, Telecom Holding, is also in the process of completing its Bt5 billion debt retirement plan, which is expected to be finalised by March next year. Telecom Holding anticipated that the conclusion would be in the form of debt- restructuring. (The Nation 22-Dec-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., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Darryl Henning, Managing Editor, Felix Ordona and Cristina Pernites, 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 strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR -- Asia Pacific subscription rate is $575 for 6 months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. *** End of Transmission ***