Sat, Sep 23, 2006 - Page 12 News List

Bank poised for foreign takeover

HELP AT HAND The Enterprise Bank of Hualien will become the first bank in Taiwan to be taken over by foreign investors if their proposal receives approval from the FSC

By Amber Chung  /  STAFF REPORTER

The debt-ridden Enterprise Bank of Hualien (花蓮企銀) has inked contracts with several foreign investors to raise NT$9.1 billion (US$276 million) in fresh funds after a negotiation marathon ended late on Thursday, the lender told the Taipei Times yesterday.

The last-minute deal struck on the deadline set by the financial regulator for self-bailout tentatively saved the troubled bank from being taken over by the financial regulator.

"We have signed contracts with a group of investors after concluding over nine hours of talks late on Thursday night," Enterprise Bank of Hualien spokesman Danny Fan (范芳明) said in a telephone interview yesterday.

The bank sent the contracts and its five-year restructuring proposal by express delivery yesterday morning to the Financial Supervisory Commission (FSC) for approval, Fan said.

Enterprise Bank of Hualien will be the nation's first bank to be taken over by foreign investors if the deal receives approval, he added.

The stricken bank, which is on the watch list of government restructuring funds, was required to finalize its self-help program by Thursday or face the prospect of the financial regulator taking control of the bank and expelling the current management.

The lender planned to complete the fundraising in two stages: First it would obtain NT$5.3 billion in funds through the issuance of preferential shares that is equivalent to a 83 percent stake, which is under way currently.

In the second phase, the bank would garner the other NT$3.8 billion through the issuance of common shares by the end of this year, Fan said.

He said that the injection of fresh funds was expected to jack up Enterprise Bank of Hualien's capital adequacy ratio to above 10 percent and lower its bad debt ratio. Fan declined to give the target.

As of July, the bank had a negative net worth of minus NT$1.8 billion, negative capital adequacy ratio of minus 11.4 percent, and a bad loan ratio as high as 22.62 percent, according to the FSC's data.

The foreign investors, who will contribute more than half of the investment, come primarily from the Southeast Asian region including the Kuala Lumpur-based Cam International Holdings Ltd Fan said.

Cam International's Executive Chairman Tan Tiong-hong (陳忠鴻) took over the bank's vice chairmanship in late April.

Besides Cam International, foreign buyer lineups reportedly include another seven Southeast Asian companies including Malaysian construction conglomerate Safuan Group and Brem Holding Berhad.

The Enterprise Bank of Hualien, which has 30 branches nationwide, has reportedly attracted interest from several potential foreign buyers including Citibank, HSBC Ltd and ABN AMRO Bank.

This interest came to nothing due to concerns about the bank's mounting bad debts.

In response, the FSC told the Taipei Times yesterday that it had started its review as soon as it received the bank's plans.

"We will examine items including the sources of funding and foreign investors' qualifications to be major shareholders and will come to a decision as soon as possible," the commission's spokesperson Susan Chang (張秀蓮) said.

Other problematic banks on the watch list include Taitung Business Bank (台東企銀) and Bowa Bank (寶華銀行).

The commission said that it is monitoring Taitung Business as its self-bailout deadline expires at the end of the month.

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