News on 19 June 2000

June 19, 2000

HEADLINE: RESTRUCTURING: FRA to pay B7bn to creditors following debtor's court ruling - FIDF to have first claim on the funds

The Financial Sector Restructuring Authority has transferred seven billion baht in funds to the Legal Execution Department following a ruling by the Central Bankruptcy Court to clear creditor claims lodged against four defunct finance companies.

The department will allow the Financial Institutions Development Fund to have first claim on the funds before other creditors are paid, according to Manit Sutaporn, deputy permanent secretary for Justice.

The FRA, which was set up in 1997 to oversee the liquidation of 56 defunct finance companies, filed suit for bankruptcy against four finance companies earlier this year.

In March, the court placed Asia Financial Syndicate, SCF Finance and Securities, Siam City Syndicate and Siam City Credit in receivership.

The department will now have responsibility for settling claims for creditors.

The FRA was forced to file the bankruptcy suit after several creditors had filed separate civil suits against the companies, despite having agreed earlier to abide by the authority's liquidation procedures.

To prevent the creditors from taking an unfair advantage of others, the FRA sought an automatic stay by the bankruptcy court to allow equal consideration of all claims.

The department has given creditors of the four finance companies until the end of the month to file their claims.

Mr Manit said the Financial Institutions Development Fund, as preferred creditor, would gain first right to the funds raised during the liquidation of assets of the four firms by the FRA.

But the development fund would have to file a legal claim similar to other creditors first, he added.

As of May, Asia Financial Syndicate had outstanding claims of 9.19 billion baht, Siam City Syndicate 5.89 billion, SCF Finance 1.2 billion and Siam City Credit 2.79 billion.

The settlement process could take up to 18 months, given that nearly 2000 civil cases remain pending against former borrowers from the finance companies.

Mr Manit said the department has established a new team specifically tasked with handling cases dealing with the 56 defunct finance companies, although staffing problems have led to delays.

Meanwhile, the FRA is awaiting a final ruling by the Council of State before it begins the process of settling claims for other creditors of the finance companies.

As of June, the FRA said it had completed reviewing claims for 49 out of the 56 finance companies, or 87.5% of the 45,099 creditors.

Overall, claims totalling 630 billion baht have been screened, or 68% of the total 919.4 billion in claims originally filed with the FRA. The FRA has raised 186.5 billion baht from its asset auctions to date.

Kochakorn Boonlai