China's Citic mulls joining Prachai to buy Thailand's TPI

02 June 2005 10:17  [Source: ICIS news]

SINGAPORE (CNI)--China's state-owned CITIC Resources Holdings Ltd (CITIC), a plywood maker and commodities trader with investments in the Chinese petroleum market, announced on Thursday that it could join Thai Petrochemical Industry (TPI) founder Prachai Leophairatana in his attempt to buy back the debt-laden company.

 

This came one day after Thailand's Ministry of Finance (MoF), which is overseeing TPI's restructuring, signed an agreement with national oil and gas major PTT Pcl to sell it a 31.5% stake. The Thai Government Pension Fund, the Government Saving Bank and national fund-manager Vayupak Fund would also take a 10% stake each, giving PTT management control.

 

The four companies were scheduled to pay for the stakes once TPI exits administration, which could end in two to three months.

 

CITIC said that it could form a joint-venture with six TPI shareholders, including Prachai, to buy 75% of TPI's issued share capital worth around $2bn (Euro1.62bn) and refinance the debt of around $2.95bn. Prachai has appealed to the Central Bankruptcy Court to allow the joint venture to go ahead with its due diligence of TPI, and to stop the sale to PTT from going ahead.

 

Since TPI collapsed under a mountain of debt after the devaluation of the Thai Baht following the 1997 financial crisis, Prachai has tried his best to prevent its sale. Over the last few months, however, it has become increasingly clear that he has been fighting a losing battle with one court decision after another going against him.

 

On Thursday, as several hundred TPI employees protested against the sale to PTT outside the MoF office, he said that the MoF had challenged the court’s authority by going ahead with the restructuring.

 

''The court's order that we come up with the funds ... indicates that I have 90 days to raise cash to pay creditors. If I can do so, the ministry's action will become void,'' he said. He added that under the civil code, creditors had no right to decline funds put up by a borrower for repayment. ''If I give them the money, they will have to accept it,'' he reiterated.

 

Thai Finance Minister Somkid Jatusripitak, however, dismissed Prachai's claim and said that the MoF would go ahead with the restructuring plan unless the court indicated otherwise.

 

A source who is closely involved in the matter told CNI that Prachai’s latest move had cast some confusion over the matter. "You see, PTT and the other government linked companies have not actually paid for TPI. They have only agreed to buy the shares and will pay for it at some point in the coming months. So technically, the deal could still collapse."

 

However, he felt that Prachai would be unsuccessful once again. "Having come this far, I doubt that the MoF will allow it to fail at this point. My gut feeling is that this case will be another setback for Prachai, and it could be his last."

By: Siva Govindasamy
+65 6780 4359

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