Italian-Thai Files Second Debt Plan by Phairath Khampha 29 September 2001 Siam Commercial Bank and the owners of Italian Thai Development (ITD) on September 4, 2001 filed ITD's 20 billion baht (1 US Dollar = 44.05 Thai Baht) debt rehabilitation plan with the Central Bankruptcy Court. The company proposed to the court that ITD Planner Co Ltd manage its finances throughout the rehabilitation process. ITD has debts of 20.14 billion baht, compared with assets of 19.4 billion baht, a 728 million bahtshortfall, hence its filing to the Central Bankruptcy Court. The debt restructuring of Thailand's largest construction firm was unlikely to be drawn out as at Thai Petrochemical Industry Plc, as most creditors and ITD's management had a common interest in speeding up the process because of the need to get the Lao Nam Theun 2 hydropower project back on track as soon as possible, according to analysts. The court convened for its first hearing of ITD's case on September 25. ITD vice president Chatichai Chutima had earlier said the company and its creditors would seek assistance from the Central Bankruptcy Court, because its major creditors had sold ITD's debt to other financial institutions. As a result, new creditors would be reviewing ITD's plan to rehabilitate, he said. Chatichai further added that ITD wanted to resolve this matter quickly as it wanted to get back to restarting the design-build work on the Nam Theun 2 hydroelectric project in Laos as soon as possible, now that some of the political issues between Laos and Thailand were being resolved by the countries' two respect prime ministers and their advisors. In July, two major creditors - Japan's Sanwa Bank and Australia's Westpac Banking Corp - sold their loans to Finansa Fund, after that Mitsubishi Trust and Banking Corp sold its 800 million baht loan to Credit Suisse First Boston. One of major creditors, who asked not to be named, said one of the major problems with ITD's plan was that the creditors and the debtors could not agree in which currency to make their calculations. In 1999 ITD had reached agreement with creditors about its debt rehabilitation plan, but the company failed to meet its undertakings. And so new negotiations began, but creditors expressed their concerns that ITD would once again ask for changes because it had already failed once to live up to its revenue projections. Under the existing debt plan, ITD would buy back its debt at discounted prices. The plan also involved extension of the repayment period and conversion of some debt to equity. To buy back debt, ITD said it planned to sell non-core assets including shares in Thai Telephone and Telecommunication and the Skytrain's operator Bangkok Mass Transit System. A meeting took place during September in Vancouver, Canada with a prospective buyer. ITD already sold investments in a wide range of businesses, including Saraburi Cement Co, various hotels, and Beer Loa Co Ltd, for more than 2 billion baht. Italian Thai Development's second quarter net loss in fiscal 2001 (Thailand's fiscal year ends on September 30) increased to 2.34 billion baht, compared with a loss of 152 million baht in the same period a year earlier. The company's 2001 first-half net loss also blew out to 2.68 billion baht, compared with 390.35 baht million a year earlier. Ital-Thai case `unlikely to be prolonged' - Co-operation helps speed up process The debt restructuring of Thailand's largest construction firm is unlikely to be drawn out as at Thai Petrochemical Industry Plc, as most creditors and ITD's management have a common interest in speeding up the process, according to analysts. An analyst at Capital Nomura Securities Plc said it was essential that ITD ask the court to speed up the rehabilitation process as out-of-court negotiations since September 2000 had made little headway. And this has held up the start of the Nam Theun 2 project in Laos. Both countries were now eager to see it go ahead. A source at Siam Commercial Bank, one of ITD's major creditors, said the major sticking point was the company's proposal to convert its entire foreign-currency debt totalling about 12.85 billion baht into local currency. ITD owed an estimated 200 million baht to SCB. The company, in conjunction with SCB, on September 4 sought court assistance to speed up the process of restructuring ITD's debts totalling 20 billion baht. An analyst at JF Thanakom Securities said that a change in the structure of the creditors' group might make the negotiations more difficult. Two major creditors, Japan's Sanwa Bank and Australia's Westpac, sold their share of the debt to new creditors who had not been identified. "The restructuring process is unlikely to be prolonged though it had been delayed for a year, taking into account the co-operative attitude of the debtor and creditors who want to speed up the process," said the JF Thanakom analyst. "It's unlike the case of TPI in which the owner was unwilling to co-operate in the debt revamp with creditors." The analyst at JF Thanakom said the request for court assistance filed by ITD was normal practice when rehabilitation could not be achieved out of court. "Shareholders in general will be affected most if the company and a group of creditors keep fighting out of court." However, the analysts said the company's operations remained strong, as it continued to be awarded large construction projects, mainly by government agencies or state enterprises.