Threat to Take Italian-Thai Development Plc to Court by Phairath Khampha 28 August 2001 Thailand's largest construction contractor Italian Thai Development's (ITD's) debt-rehabilitation plan looked likely to have problems after 33 per cent of its bondholding creditors proposed filing the plan with the bankruptcy court. This could impinge on the firm's attempts to restart its work on the design of the Nam Theun 2 Hydropower project in Laos after Thailand's prime minister visited his Lao counterpart and made arrangements to expedite the process holding up the development. In a further development to try to expedite the process of getting on with the hydropower project, the company stated it was planning to ask the Central Bankruptcy Court for assistance in September to accelerate its debt-restructuring plan worth 20 billion baht (1 US Dollar = 44.28 Thai Baht). Threat to Take Italian-Thai Development Plc to Court According to one bondholding creditor, who did not want to be named, bondholders agreed with most of ITD's debt plan but one sticking point was the currency of its debt. ITD has several currencies of debt with bondholders worth about 3 billion baht (1 US Dollar = 45.42 Thai Baht). It planned to change all its foreign debt to baht, but the bondholders disagree. As a result 33 per cent of them resolved at the beginning of August 2001 to file the company's debt plan with the Central Bankruptcy Court. But another 33 per cent were still undecided, one major bond-holder said. "Bondholder creditors are still negotiating for a review of ITD's debt-restructure plan again. If it cannot be resolved, bondholders will file its debt-rehabilitation plan in the Central Bankruptcy Court," said one bondholder, who asked not to be named. The company's vice president, Chatichai Chutima, said ITD had completed its debt plan, due to be approved by creditors in August, but conceded there could be delays. ITD had 12 billion baht in total debt for restructure. Some 3 billion baht of that was owed to bondholders. Under ITD's debt-rehabilitation plan, the company would sell non-core assets worth 4 billion baht to pay back creditors, while the company will put up 1.7 billion baht in cash to buy back debt at a discount minimum rate of 40 to 60 per cent. The rest of its debt would be rescheduled for paying back over a period of up to eight years. This will be ITD's second round of debt-restructuring, after creditors agreed in late 1999 to extend the repayment period on US$200 million (9.09 billion baht) of loans for the following five years so that it could resume carrying out the hydropower project. "We still don't know whether the [recent] changes will affect the plan or not. It depends on the new creditors. But we are worried that there may be some delay," Chatichai said. A source said that two major creditors, Japan's Sanwa Bank and Australia's Westpac Bank, had sold the debts to new creditors. ITD owed more than 1 billion baht to Sanwa and 450 million baht to Westpac. The other major bank creditors were Thailand's Siam Commercial Bank and BNP Baribas Bank. The firm said the weakening of the baht against the US dollar and an increase in interest burden had forced it to restructure its debt again. Chatichai said the firm had sufficient funds to buy back debt from its creditors. ITD said earlier it had planned to sell more non-core assets to buy back debt. It had already sold investments in a wide range of businesses, including cement, hotels and beer, for more than 2 billion baht. Italian-Thai to seek court help Italian Thai Development Plc said it was planning to ask the Central Bankruptcy Court for assistance in September to accelerate its debt-restructuring plan worth 20 billion baht, a creditor source said. The move was seen as the first by the financially ailing company to put its debt-revamp plan under court supervision after having tried to handle the plan itself. ITD hit a stumbling block when most of its creditors refused to go along with the plan, so the company was likely to be forced to ask for help from the Central Bankruptcy Court, the creditor source said. ITD vice president Chatichai Chutima confirmed to the Penguin Star that the company and its creditors would seek assistance from the Central Bankruptcy Court to accelerate the restructuring. "We would have liked to do [the restructuring] by ourselves, but we need 100 per cent support from creditors . . . It is very possible that we will seek court assistance," Chatichai said. The company's plan to reorganise its debts in August and to begin the process to restart the design/construction of the Nam Theun 2 hydropower project had to be put on hold because major creditors had sold ITD's debts to other financial institutions, he said. In August, two major creditors - Japan's Sanwa Bank and Australia's Westpac Banking Corp - sold their loans to new unidentified creditors. ITD owed more than 1 billion baht to Sanwa and 450 million baht to Westpac. This was ITD's second round of debt restructuring after creditors in late 1999 agreed to extend the repayment period for US$200 million of loans for another five years. ITD informed the Stock Exchange of Thailand that it would not report its second-quarter results until September 14, one month late, as it needed more time to re-evaluate its assets as part of the restructuring plan. Under the tentative debt plan, ITD would buy back its debt at discounted prices. The plan also would involve an extension of the repayment period and a conversion of some debt into equity. The firm said the weakening of the baht against the dollar and an increase in its interest burden as a result of the collapsing Asian economy that appears will bring a new economic crisis to the region had forced it to restructure its debts again. To buy back debt, ITD planned to sell non-core assets including shares in Thai Telephone and Telecommunication and skytrain-operator Bangkok Mass Transit System Plc. It had already sold investments in a wide range of businesses, including cement, hotels and beer, for more than 2 billion baht. A Canadian company that assists in the formation of public companies and similar deal would probably purchase BMT System Plc.