Objections to Italian-Thai Development Debt-Restructuring Plan as Workout Proceeds by Phairath Khampha 22 April 2002 Italian-Thai Development Plc (ITD) bondholders and some of its creditors said they would file an objection to company's debt-restructuring plan that was accepted by the Central Bankruptcy Court on April 4, 2002. According to a representative of some ITD bondholders, the deal was unfair. This could prolong ITD's burdensome financial problems that are preventing it to properly and effectively concentrate on design-build projects in Thailand, Laos, Philippines and other Southeast Asian countries. A joint venture involving Italian-Thai Development signed a contract with the Port Authority of Sihanoukville for the rehabilitation of Sihanoukville Port in Cambodia. However, Italian-Thai Development made headway on debt restructuring during the second week of April when the Central Bankruptcy Court cleared the company to reduce and later increase its registered capital. "However, we have to accept the Central Bankruptcy Court's ruling, although we will seek a rejection from the Supreme Court. This is a good lesson for our firm about investment in bonds or shares in other firms in the future," the representative said. On April 4, Judge Niracha Panichatra of the Thai Central Bankruptcy Court, announced the approval of the debt-restructuring plan, which he said was needed so that ITD was able to take part in a major contract to build the terminals and concourse at Bangkok's new international airport and to design and build the Nam Theun 2 hydropower project in Laos. The court ruled that the deal was in the interest of all parties. In December 2001, a majority of creditors holding 80.5 per cent of the company's total debt, approved the plan. However, another group of creditors, including BNP Paribas Bank and Ayuthaya JF Asset Management, which is a representative of the bondholders, claimed unfair treatment and filed a petition against the plan. The company, which is Thailand's largest construction firm, needed the court's approval for its restructuring plan of debts worth Bt12.81 billion. Premchai Karnasuta, ITD's president, said that the company intended to implement the debt-restructuring plan within two months. Then the company would ask for approval to exit the Bankruptcy Court's rehabilitation process Under the company's debt-restructuring process, ITD would increase its capital by 230 million new shares for sale to exiting shareholders and convert a part of its debt into equity with a minimum price of 10 baht each. The creditors who convert their debt to equity have to cut their loans to no more than 65 per cent of their total debt. The company aimed to repay 2 billion baht in six years while the remainder would be financed through the sale of non-core assets including a part of its stake in Thai Telephone and Telecommunication Plc, Bangkok Mass Transit System Plc and its land bank. "I feel heartened by the court's ruling in favour of the company's restructuring plan. Then we can focus on our business and have more opportunities to win more construction projects," Premchai said. He said the company would now be free to move ahead with the construction of terminal and concourse buildings at Bangkok's new international airport and the design-build of the Nam Theun 2 hydrpower project. "The debt-restructuring plan won't slow down the progress of construction. The project is ahead of schedule," Premchai said. After the court's approval, the company could continue its contracts for three construction projects, totalling 26.5 billion baht in Indonesia, Laos and the Philippines, and another huge project in Nepal. This was part of 12 projects worth 50 billion baht the company was bidding for in 2002. The company expected its revenue in 2002 to exceed 15 billion baht. Italian-Thai wins Sihanoukville port job Meanwhile, a joint venture involving Italian-Thai Development Plc signed a contract with the Port Authority of Sihanoukville for the rehabilitation of Sihanoukville Port in Cambodia. Penta Construction Co Ltd is the other partner in JV POC-ITD, which was awarded the contract valued at US$30.63 million. Italian Thai, as a 45% shareholder in the venture, would earn $13.78 million. The work involves the dredging of approximately 900,000 cubic metres, reclamation of a 240-metre quay, paving a container yard and constructing a 320-metre interconnection road. The work was scheduled to be completed within 912 days of the contract signing. Italian-Thai debt workout proceeding Italian-Thai Development Plc nevertheless made headway on debt restructuring during the second week of April when the Central Bankruptcy Court cleared the company to reduce and later increase its registered capital. Italian-Thai's debts totalled 12.85 billion baht. On April 10, the court allowed the company to write off unissued shares worth 1.805 billion baht from its existing registered capital of 4.305 billion baht. The remaining registered capital would then equal the company's paid-up capital of 2.5 billion baht, divided into 250 million ordinary shares at 10 baht par. Italian-Thai would then increase its capital to 4.23 billion baht by issuing 173 million ordinary shares at 10 baht par. Of the 173 million new shares, 50 million would be allotted to existing shareholders in a ratio of five old shares to one new share priced at 10 baht, The subscription period was set for May 10 to 16. The remaining 80 million new shares would be allotted at 10 baht each to creditors who joined a voluntary debt-to-equity conversion programme, with 43 million new shares going to creditors under the mandatory debt-to-equity conversion. The company told the Stock Exchange of Thailand that shareholders' approval was not needed for the change in capital as legal requirements had been met. However, the company seeked Securities and Exchange Commission approval to offer shares to two groups of creditors. The company's board also proposed that shareholders approve the allocation of dividends based on no less than 40% of net profit. Italian-Thai president Premchai Karnasutra said earlier that the capital increase procedures were expected to be finished within one month, and the company was expected to be out of rehabilitation within two months.