TPI sees fortunes change

A SERIES of public-relations blitzes by Thai Petrochemical Industry Plc (TPI) since last week indicates that the country's largest debtor may be losing the war in the court.

A legal source said Prachai Leopairatana, the chief executive officer of TPI, held a meeting with his family members last week and told them to prepare for the possibility that TPI could lose its court battle against creditor banks.

Early last week, Prachai was still confident about the outcome of the historic bankruptcy case, the source said. The Central Bankruptcy Court is deliberating whether TPI, which owes creditors US$3.5 billion, is insolvent or not.

So confident about the case was Prachai that he did not present himself at a witness hearing on March 1-2, allowing Wachirapunthu Phromprasert, his chief financial officer, and other aides to deliver most of the testimonies, the source added.

If the creditors wanted a compromise, they would have to agree with Prachai on a US$900 million debt forgiveness or haircut - not US$400-US$600 million as earlier raised at the negotiating table.

But events changed quickly, forcing TPI to come out with a desperate defensive strategy. On March 8, the company sent a letter to the Stock Exchange of Thailand to inform the investing public about the latest progress in the legal battle.

It also appealed to nationalist sentiment, arguing that the benefits of the country were at stake if TPI were to be taken over by the foreign creditors who were keen to chop its assets into pieces for liquidation.

The following day, Wachirapunthu held a news conference to discredit Ferrier Hodgson Ltd, which is the 99 per cent shareholder of Affective Planner Co. Affective Planner is earmarked by Bangkok Bank to replace Prachai as planner of TPI's rehabilitation programme.

Again, Prachai avoided the public limelight, failing to show up at the news conference to present his side of the story.

These incidents have been seen as an indication that Prachai would try to remain planner of TPI even though he realised he could lose the court battle over the question of insolvency.

The Central Bankruptcy Court is scheduled to hand down its decision tomorrow as to whether or not TPI is insolvent. It is also expected to decide who should become planner of the troubled company.

The case has become one of the hottest topics in Thailand, with far-reaching implications on corporate restructuring. Since the beginning of the year, sentiment in the Thai market has cooled significantly due to the wrangling over TPI.

Prasarn Trairatvorakul, secretary-general of the Securities and Exchange Commission, said investors were closely watching the TPI case because the ruling would affect the 60 debt-restructuring cases involving listed companies.

At issue is whether TPI is insolvent or not. The creditors contend that its liabilities exceed its assets.

According to a Standard Chartered Bank research report: "This comes down to an issue of valuation method. TPI values its assets on a replacement cost basis which results in the company still being solvent - despite market rates of exchange being much worse than used in the current balance sheet.

"Meanwhile, creditors look at the business as a going concern. Thus their methodology focuses on an analysis of the company's likely cash-flow stream and the ensuing asset disposal. Therefore, a key feature of the TPI case will be the method by which the bankruptcy court values the company's assets, replacement cost, supporting TPI, or cash flow and asset disposal, for the creditors."

BY SOMLUCK SRIMALEE and

THANONG KHANTHONG