Italian-Thai Asset Sales To Cut Debt and to Re-Start New Operations by Phairath Khampha 15 May 2001 Non-core businesses could fetch 5 billion baht In a bid to reduce its debt burden of 20 billion baht, Italian-Thai Development Plc (ITD), the Thailand's largest construction firm, has decided to sell non-core assets worth five billion baht. The assets not related to the construction industry include holdings in many associated firms as well as land and properties nationwide. President Premchai Karnasuta said the sales would help ITD focus more on its core construction business and also restart the design-build Nam Theun 2 Hydropower Dam project in Laos. "We are not in a rush to sell our non-core assets. However, we want to generate cash to repay our creditors as much as we can so that we can get out of our current financial mess which is making it difficult for us to start up some projects," he said at the annual shareholders' meeting on May 1, 2001. The company was now restructuring 11.5 billion baht in debt owed mainly to foreign banks and debenture holders. When letters of credit and money owed to trade creditors were taken into account, the group's total liabilities were 20 billion baht at the end of 2000. Some investments such as Bangkok Mass Transit System Plc, operator of the skytrain, had been especially damaging to ITD's bottom line and its share price. "We had to write down losses from investment holdings up to four billion baht last year," said Mr Premchai. Recently, ITD sold its cement plant in Sara Buri for one billion baht. The next assets with sales potential were expected to be Lao Brewery, BTSC and Thai Telephone and Telecommunication. Mr Premchai said debt restructuring was progressing well and the creditors' steering committee would meet to vote for the plan in June. Of the total debts of 11.5 billion baht, unsecured loans in US dollars accounted for 8.5 billion baht, and debentures made up the rest. Major creditors were Sanwa Bank, HSBC and Bank Paribas. Under the plan, the debt repayment term would be extended, some assets would be paid for debt and some debt would be converted into equity. "After the debt restructuring, the Karnasuta family would continue to control the firm," said Mr Premchai, adding that the family now held a combined 80% stake in ITD. He said the local construction industry had been very depressed due to the property crisis. As well, the new government was looking to slash budgets for infrastructure projects within Thailand. Hence ITD was seeking to restart the hydropower project in Lao, which had been stalled because of its financial problems. "This policy will definitely affect the entire business. To offset narrowing opportunities here, we have to go abroad to bid for more projects, which will be financed by the World Bank or the Japan Export and Import Bank." The Nam Theun 2 Hydropower Project was being financed byt he World Bank/ ITD would participate in bidding for infrastructure projects such as irrigation, dams, hydropower, roads, airports, bridges and subways in the Philippines, Laos, Vietnam, Taiwan, Dubai and Qatar. On the domestic front, ITD in 2001 would sign new contracts worth 9.6 billion baht while its total contracts in hand were valued at 36 billion baht-80% for government-sponsored projects and the rest in the private sector. in 2000, ITD posted a consolidated net loss of 3.96 billion baht compared with a loss of 1.45 billion baht in 1999.