Three may vie for NFCstake

23 June 2003 00:00  [Source: ACN]

Sumitomo Corp, the Xiyang Group and SVM Property are considering bidding for a 71% stake in Thailand's debt-ridden National Fertiliser Co (NFC) on 24 June, informed sources told ACN last week.

Sumitomo is the latest potential investor to show interest in acquiring the stake, according to the sources.

The company and the US' Cargill have teamed up to look into the possibility of acquiring the stake together, the sources said. Both companies may use their subsidiary companies in Thailand to bid for the stake, they added.

Sumitomo's subsidiary, Sumi-Thai International, is a trading company, while Cargill's subsidiary, Cargill Siam, is an agricultural producer and trading company.

The Xiyang Group and SVM Property had submitted bids for the stake in May. But NFC's creditors rejected the bids, which they deemed too low, and arranged for a second bidding on 24 June.

The Xiyang Group, whose business includes fertiliser production, had teamed up with Thai Picon, a local construction company, to bid for the stake in May.

The two companies, which had previously teamed up for construction projects in Thailand, may do so again for the second bid.

'Teaming up with Thai Picon will help Xiyang understand Thai business culture,' one source told ACN.

Thailand's SVM Property, whose business includes the export of agricultural products, is likely to make a bid on its own, ACN understands.

NFC's financial adviser, CJ Morgan, had invited some 40 fertiliser and agribusiness companies to bid for the stake.

But only representatives from Sumitomo, Xiyang, Thai Picon and SVM Property showed up to pick up all the relevant information from CJ Morgan by the 4 June deadline.

The information included a due diligence report put together by CJ Morgan, and a schedule and timetable for the bidding.

An official from Sumitomo confirmed that representatives from the company had picked up the information from CJ Morgan. But he said the company had not decided whether or not to bid for the stake.

The other companies could not be reached as ACN went to press.

As part of the conditions for the bidding, potential investors must allow the Bank for Agriculture and Agricultural Cooperatives the option to exercise its right to keep for itself 20% of the 71% stake.

Should the bank decide not to exercise the option, the successful investor would have the right to buy the 20% stake.

NFC's existing shareholders - Petroleum Authority of Thailand (20%), the Government Savings Bank (12%), the Industrial Finance Corp of Thailand (16%), Siam Commercial Bank (9%), Siam City Bank (6%), Thailand's Ministry of Finance (6%) and the general public (30%) - would see their stakes diluted to a total of 29% after a strategic investor acquires the 71% share in the company.

The potential investors must submit, along with their bids for the stake, any amendments they want made to NFC's debt-restructuring plan.

ACN understands that the debt plan would include a write-off on a certain portion of the debt. But further details were not available.

An MoU on the sale of the stake is expected to be signed by end-July, after which the debt deal would be sent to the Thai Bankruptcy Court for approval by the end of this year.

NFC's 1m tonne/year fertiliser plant in Mab Ta Phut, Thailand, has been operating at around 35% for the last few years due to insufficient working capital.

The company had incurred losses since mid-1997, when the devaluation of the Thai baht plunged Thailand into a financial crisis.

In Q1 2003, NFC booked a net loss of Baht475.3m, compared with a net loss of Baht559.7m in Q1 2002.

The company's net loss in 2002 rose to Baht1.96bn, from Baht1.86bn in 2001.

NFC's creditors - Siam Commercial Bank, Krung Thai Bank, Siam City Bank and the Industrial Finance Corp of Thailand (IFCT) - tried to sell a 20% share in NFC to a potential investor last year, as part of the company's debt-restructuring plan (ACN 14 Jan 2002, p6).

They were unsuccessful.

They then revised the debt plan, which saw the stake for sale increased to 71%, and all of the company's debts taken over by Thai Asset Management Corp (TAMC) and Siam Commercial Bank.

TAMC currently owns 75% of NFC's total outstanding debt of Baht13-14bn (US$312-336m), of which around Baht8.3bn is the principal amount.

Siam Commercial Bank owns the remaining 25%. The creditors are expected to decide on the winning bid, if any, on 27 June.

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