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Liquidation process poses major challenge for FRA

 

Thanong Khanthong talks to Vicharat Vichit-vadakarn, secretary-general of the Financial Sector Restructuring Authority.

The task facing the secretary-general of the Financial Sector Restructuring Authority (FRA) is daunting. Vicharat Vichit-vadakarn, a former president of Capital Nomura Securities Plc and chairman of the Association of the Securities Companies, has been mandated to liquidate some Bt920 billion in assets of the 56 finance companies permanently closed by the authorities last year.

Despite all its legal and accounting aspects, this highly-technical process will have to be completed within 12 months.

Vicharat and his staff, mostly recruited from the Bank of Thailand, Finance Ministry, Stock Exchange of Thailand and Association of Securities Analysts, are operating out of a modest office with a handful of computer terminals and barely any furniture on the 20th floor of the Sindhorn Thani Building's Tower III.

At times, he and his staff have had to use the conference rooms of the Bangkok Stock Dealers Centre, located next door. This frugality reflects the state of the economy in general and exemplifies their unpretentious, down-to-earth determination to clean up the remnants of the economic bubble era.

For the FRA, the success of the first liquidation will be crucial in winning confidence. That is why Vicharat is working hard to put together broad guidelines detailing how the assets are going to be classified and liquidated -- in pieces or in block sales.

Most of the assets are in the form of hire purchases, property loans, commercial loans, industrial loans, consumer loans and confiscated cars, furniture, computers, buildings and land. The list goes on.

The auction process will have to be transparent and meet international standards. The objective is to attract the best buys or best value for the assets and to prevent a general collapse of asset prices.

''Within January, you can expect us to know how we are going to liquidate these assets. By February or early March you can also expect to see some transactions take place,'' Vicharat said.

Already, the 56 closed finance companies have received operating procedures outlining what they can and cannot do. The procedures involve how they should proceed with debt collections for hire purchase, retail and corporate loans, promissory note conversion, debt collateral, avals and guarantees, creditors and debtors offsetting procedures, company operating and other expenses, debt settlements, the sale of surplus company assets and securities businesses. This will ensure that some of the good assets can be kept sound.

''We're now in talks with the Financial Institution Development Fund [FIDF] over how they can release the collateral of clients who have settled all their debts with the suspended finance companies. If we can resolve this issue, it will open the door to tackling other nitty-gritty problems,'' Vicharat said.

The FIDF has provided Bt430 billion in liquidity support to the failed firms, who in turn have pledged the collateral that their clients pledged with them to the FIDF. This legal problem will have to be resolved to prevent a possible backlash in lawsuits.

Vicharat will not say what will be classified as good or bad assets, but the way in which the assets are grouped together for sale and the interest they attract will reflect their quality. ''The judgement will depend on the buyers,'' he said. The bad assets will be handled by the ''bad bank'', or the Asset Management Corporation, which will have to raise enough funding to fulfil its task.

In general, if the FRA can fetch 50 per cent of the original prices in the liquidation of the assets its task should be considered a success by market analysts. ''We'll try to get the best deal. If we're not careful enough, we won't get good prices,'' Vicharat said.

 

 

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