The legendary duo has split amid troubles at Finance One Plc. Thanong Khanthong reports.

The resignation last week of Termchai Pinyawatn, who formed part of the legendary duo with Pin Chakkaphak and played a dazzling role in building Finance One into Thailand's largest financial empire, illustrates a rift in the relationship between the two comrades, people in the industry say.

As the turmoil surrounding Fin-One intensified late last month when the firm was forced into seeking a merger with the Thai Danu Bank, Termchai had already lost the confidence of the major shareholders and the board. He was portrayed as the man at the centre of the Fin-One disaster by plunging the company into reckless portfolio investments until the company had used up of its stockpile of assets.

He and Pin were no longer on speaking terms.

On February 28, a report was leaked that Termchai, who had been barred from attending the board meeting in spite of his senior position as a managing director, had decided to resign. Termchai could not be reached for this article, yet it was clear that the major shareholders who formed Fin-One's board wanted to vote on the crucial merger issue in his absence. Termchai's presence might have influenced their decision at a crucial time when they were to decide on the future of the company, or so the major shareholders thought.

Last Thursday, Dr Thanat Khoman, the chairman who has shown his high spirits by sticking to Fin-One through good times and bad, signed Termchai's resignation letter into effect. There was a grey area here: Did Termchai want to quit, or did the Fin-One board want to boot him out in the first place?

Termchai was described by his friends as a cool investment strategist ­ so cool that his pale face was almost expressionless in the face of high stakes. ''He is very good at the stock market. In some respects, he is even keener than Pin. Pin would never have come this far if he did not have people like Termchai or Samrarn (Kanokwattanawan, another managing director) working for him," said a person familiar with the Fin-One affair.

While Pin enjoyed most of the glory as the takeover king, Termchai was quite comfortable playing second fiddle. While Pin was spending most of his time drawing up the grand design for Fin-One, which was aiming to become a full-service financial powerhouse, Termchai was spinning out money for the company with his high-finance touch.

Since Termchai was also responsible for Fin-One's back office, he was the man who really called the shots when it came to the company's bottom line. During Fin-One's glory days, which coincided with the booming era of the Thai economy, everything he laid his hands on turned to gold. Similar to Pin, his net worth is in the billions of baht.

However, success breeds carelessness. This was exactly the case at Fin-One. It overstretched its financial muscle by acting as a friendly uncle to its subsidiaries. In the case of Ekkaphak Holding or One Holding, for instance, firms in which Fin-One holds a 10 per cent stake each, Fin-One lent them money that turned sour. Termchai became so deeply involved in the interests of Fin-One and its subsidiaries that it became almost impossible to draw the demarcation lines.

An account from Pin's side has it that Termchai was out to destroy the company after he realised that he was no longer its favourite son. He was ready to jump ship. Since the major shareholders of Fin-One, capitalised at 414 million shares, are widely spread, there was little display of loyalty to the company during bad times.

''In the hey days, some of the management enjoyed making money on the back of the company. When the company turned out to be in trouble, they all jumped ship," said an insider at Fin-One Group.

Public notifications filed to the Securities and Exchange Commission showed that Fin-One's long-time shareholders took to the lifeboats one by one. They unloaded their shares to speculators outside the Fin-One circle. Now people are beginning to feel unsure about whether a professional-style management or a family-style management is better.

Yet Pin should also share the blame for this episode. His strategy was flawed from the start. All the managing directors of the Fin-One family companies received the message directly or indirectly that they should try to outperform the market or have their companies grow by 25-30 per cent. To keep their jobs, they were forced to become less prudent with the companies' funds.

The result was that nobody was talking about the risks of a downturn. The Thai stock market looked invincible. As late as the middle of last year, even the Bank of Thailand suggested that there was nothing fundamentally wrong with the Thai economy, which however was destined for the hardest landing in more than a decade. Fin-One was to pay dearly for this one-way-street mentality, blissfully unaware that it was vulnerable ­ if not a prime hostage ­ of the Thai economy and the stock market.

During his address to a conference of the Association of Finance Companies last week, Rerngchai Marakanond, the Bank of Thailand governor, was highly critical of the practices of ''one over-confident company", which over-invested and over-expanded during the good times, without thinking about the downside risks. It was understood that he was preaching a never-do-it-again message, targeted at Fin-One in general and at Pin in particular, who happened to be the president of the association and who happened to play host to that conference.

Pin's spirit should be commended, after all. He swallowed his pride and went into the conference, knowing that some of his peers were probably delighted to see his downfall. When it emerged that Fin-One was facing liquidity problems in late January, the first to attack the company were fellow finance companies who called back their loans. Rerngchai also reprimanded the finance company members for a lack of spirit. He said they were more interested in saving their butts in this incident without thinking about the common interest of the Thai financial system.

Fin-One relied on the interfinance system for more than Bt16 billion of its funding. How could it withstand the onslaught, being attacked from all directions? In this high-flying industry, there are no real friends, as Pin has now realised.

People in the industry are looking at the Thai Danu Bank/Fin-One merger with a sense of unease these days. They aren't sure how the merger will develop, given all the obstacles. This represents the first time a finance company will merge with a bank. Yet the Bank of Thailand has asserted that it would like the Thai Danu Bank/Fin-One merger to serve as a model for other mergers and acquisitions to follow in the troubled finance sector.

There are conflicting reports as to how far this deal will go. A financial source indicated that the board of the Thai Danu Bank, in a series of emergency meetings last Friday, decided to go against the merger, though this resolution will not be made public. It appears that, if this report is accurate, the Thai Danu Bank board is reluctant to take any risk by marrying a strange, if not aggressive, bedfellow in Fin-One.

Another account is that Thai Danu Bank will demand a discount for the swap of the Fin-One shares after deducting the assets and liabilities. So in theory, the Fin-One stock can be worth Bt10 or Bt1, depending on the final valuation. In the merger, a new entity will be created and renamed Thai Danu Bank, which will issue stock to both Thai Danu Bank's and Fin-One's shareholders in proportions to be negotiated.

An account from Fin-One's side is more encouraging. Since both the boards of Fin-One and Thai Danu Bank have approved the merger deal, the two organisations are committed to working fully to fulfil a lofty goal ­ the creation of a new organisation with Bt220 billion in assets, thus strengthening the Thai banking industry as a whole.

''Khun Pornsanong (Tuchinda), Khun Khan (Prachuabmoh), Khun Chaiwat (Uthaiwan), Khun Suthat (Ramasutra) and Khun (Nittikorn) have been closely involved in this deal. They are enthusiastic about it. On Fin-One's side, Khun Pin, Khun Krairit (Euchukanonchai), Khun Chumphol Pornprapha, Khun Charn Srivikorn and Khun Taveeb Chartthamrong are the key drivers. So the deal is an on-going process. We're about to appoint an international valuer soon," said an executive of the Fin-One Group.

The Manager speculated in its lead story yesterday that it was not in Pin's nature to call it quits easily. The newspaper gave the impression that Pin was trying to buy time until the turmoil subsides and then he will strike back by launching a management buy-out to keep Fin-One independent.

By the way, the Fund for Rehabilitation and Development of the Financial Institutes has been providing a 100 per cent guarantee to all the promissory note (P/N) holders. There should be no further panic with Fin-One.

This theory is not totally groundless. A recapitalisation, of for example Bt2 billion or Bt5 billion, should help Fin-One to stand on its feet again, although it needs to settle its emergency loans obtained from the Fund by placing account receivables and other portfolios as collateral.