Eager to put an end to a six-year battle that has become an embarrassing reminder of the pitfalls of investing in Thailand, the Thai government has intervened to remove the founder of the country's biggest defaulter, Thai Petrochemical Industry.
Under a deal reached this week between the finance minister, Suchart Jaovisidha, and the founder and former chief executive of Thai Petrochemical, Prachai Leophairatana, Prachai will step aside from day-to-day business at the company.
In return, Prachai appears to have won cooperation in his efforts to remain in charge of the company's cement unit, TPI Polene.
"TPI has many problems that need urgent solutions," Suchart told reporters Thursday, using an abbreviation for Thai Petrochemical.
"I've asked Prachai to completely halt any role in the company," Suchart said.
Thai Petrochemical became Thailand's biggest defaulter in 1997, when it stopped payment on US$4.2 billion in debt.
Prachai has fought its creditors for six years to hang on to the company, often appealing to xenophobia and union fears of layoffs.
In a landmark decision, Thailand's bankruptcy court declared the company bankrupt in 2000, but earlier this year it ousted creditor-appointed administrators and put the finance ministry in charge of the company's restructuring.
The problems at Thai Petrochemical, which still owes US$3 billion, became emblematic of the unfinished business of corporate restructuring in Thailand when the Thai economy recovered from the Asian financial crisis of 1997 and 1998.
A program of government spending has led to an economic revival that has made Thailand a standout in Asia.
With foreign investors plowing money into Bangkok's stock exchange, the debacle at Thai Petrochemical became a piece of unsightly wreckage.
"The government's decided it's had enough of the bad publicity," said one creditor involved in Thai Petrochemical's restructuring.
Throughout the bankruptcy proceedings, Prachai also remained chief executive and administrator at TPI Polene, which owes creditors another US$1.1 billion.
Prachai has proposed borrowing US$750 million to buy back US$1 billion of TPI Polene's debt, with bankers writing off the remaining US$250 million. Creditors rejected that proposal.
But now, in return for Prachai's complete departure from Thai Petrochemical, the finance minister has apparently agreed to persuade the state-owned Krung Thai Bank, a major Thai Petrochemical creditor, to lend TPI Polene the US$750 million.
It remained unclear whether the bank would comply.
According to local news reports, the deal requires that Thai Petrochemical and TPI Polene unwind their cross-shareholdings and swap noncore assets, with Thai Petrochemical exchanging some assets and its stake in TPI Polene for TPI Polene's petrochemical units.
That was reportedly one prerequisite Krung Thai had made for lending to TPI Polene.
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