SFC reject's Kuo Hua Life's recapitalization

Kuo Hua Life Insurance Co (國華人壽) said the Securities and Futures Commission has rejected its application to sell NT$3 billion (US$87 million) of new shares to its existing shareholders.

The unit of Hualon Corp (華隆), a textile maker that's seeking government help in fending off creditors, confirmed the delay. Wang Wei-siu, a senior official with the insurer, said the hold-up is purely for technical reasons.

"The share issue is not canceled, but delayed as we didn't follow proper procedures," Wang said.

Although the sale is not to the public, SFC permission is still required, and the delay in approval could force Hualon to sell Taiwan's fifth-biggest insurer by sales to either National Mutual Life Insurance Co (安盛國衛人壽), a unit of AXA China Region Ltd, or ING Group NV (荷蘭國際集團).

Wang denied there had been sale talks with ING, though he said the insurer had held talks with National Mutual -- something that AXA denied.

"AXA is not in talks with Kuo Hua," said John Snelgrove, general manager of corporate affairs for AXA China.

The insurer meanwhile cut the annual return it offers on policies to 4 percent from between 5.5 percent and 6 percent in a bid to lower costs, Wang of Kuo Hua said.

Hualon, sought government intervention on Thursday to delay repayment of its loans and bounced a check it wrote for NT$102 million (US$3 million).

The bounced check was drawn on Hualon's account at Baodao Commercial Bank (寶島商銀), one of 33 creditor banks that have extended a total of NT$17.4 billion in loans to Hualon, company spokeswoman Yao Chia-chih (姚嘉芝) said.

Hualon has asked the Ministry of Finance to mediate with creditor banks to lower interest charges and postpone maturity dates on

its loans to help its finances, Yao said.

The ministry has refused to make specific instructions to Hualon's creditor banks, though it will allow banks to conduct their own evaluations, the Central News Agency reported, citing vice finance minister Sean Chen (陳沖).

Hualon is the latest textile maker to struggle in a shrinking domestic market as garment makers and other customers relocate plants to China and southeast Asia, where production costs are lower.

Hualon lost NT$4 billion last year, compared with a NT$231 million loss in 1999.

The company lost NT$599 million in the first three months of 2001.