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The government view. Interview with Kap Soo Oh, assistant governor of the Financial Supervisory Service.

For three years he battled to implement a restructuring plan at Thai Petrochemical Industry, the country's biggest and most recalcitrant corporate debtor. Now following a landmark ruling from the Central Bankruptcy Court he has seized control of the corporation on behalf of creditors. Can Anthony Norman pull off the most important restructuring case in Thailand's recent corporate history? By Ben Davies.

The Bank of East Asia has launched what is expected to be the new benchmark for investment-grade subordinated debt offerings in the region. The US$550 million lower tier 2 placement is the largest sub debt deal in non-Japan Asia in the past 12 months. Sole bookrunner and lead manager was JP Morgan, with Barclays Capital acting as joint lead manager. The bond was carefully structured to utilize the efficient 10-year step-up five structure to avoid capital amortization. What this means is that BEA will be able to call the bond after five years when the regulatory authorities will start reducing the portion of the money raised to be allowable for capital adequacy purposes. This in effect means that if the bank held on to the bond proceeds after five years, it would be paying a premium for the funds.

Bank amalgamation continues apace in India with the recent merger of two domestic private sector banks – ICICI Bank and Bank of Madura. The share swap deal (at a ratio of two ICICI Bank shares to one Bank of Madura share) took effect on February 1, with ICICI effectively the acquiror. The deal is the second private sector bank merger in recent months – HDFC Bank acquired Timesbank last year – and the trend is expected to continue. Furthermore, three foreign banks – HSBC, Standard Chartered and BNP Paribas – have shown interest in purchasing Indian banks, provided the regulatory framework is in place. It's not yet clear, however, whether the Reserve Bank of India (RBI) would approve such a move.

Just as it looked like HSBC Holdings would acquire a 75% controlling stake in ailing Bangkok Metropolitan Bank (BMB), both sides announced on December 29 that the deal was off, citing irreconcilable differences over the tax treatment of restructured loans. HSBC's demands for more favourable terms were deemed unacceptable by Thailand's Financial Institutions Development Fund (FIDF), which has already spent an estimated Bt1.3 trillion (US$30.1 billion) bailing out banks and finance companies that collapsed at the height of the crisis. "By the end, it looked like the FIDF would virtually have to pay HSBC to take the bank off its hands," says one source close to the negotiations. "That was politically unacceptable." In retrospect, the sale of BMB was never going to be easy. As of November, non-performing loans at the bank amounted to 57.9% of total loans, according to the FIDF. In reality, that figure may have been considerably higher, raising question marks not only about the asset values at BMB, but at the other domestic banks. To date, both sides have kept a tight lid on their discussions. HSBC has made it clear, however, that whilst disappointed by the outcome, it continues to view Thailand as a country of considerable strategic importance.

The board of Reliance Industries, one of India's largest companies, has passed an enabling resolution to increase the company's foreign shareholding limit from 24% to 40%. A company spokesman said that the board resolution would be considered at the next annual general meeting of its shareholders, likely to be held in June or July. The same source declined to comment on the reason behind the decision which, at first glance, seems somewhat unwarranted since foreign investors hold just 14% of the company's shares - well short of the 24% limit. (The family of the company's Indian chairman, Dhirubhai Ambani, controls 40% of the stock following a recent 2% acquisition and has announced plans to raise its holding to 51% over the next few years.)

It's a done deal. Well, it's a nearly done deal. Well, actually, there are quite a few loose ends. Eighteen months after Bank Negara Malaysia first announced the December 31 2000 deadline for the merger of Malaysia's banks, the bank mergers still aren't all done. But the process is underway: 50 of the previous 54 banking institutions have been consolidated (the official phrase) into 10 banking groups, representing 94% of the total assets of the domestic banking sector. Only two groups have been unaffected by the process: Commerce Asset-Holding, the country's second-largest banking group, and Rashid Hussain Bhd (the fourth-largest). One set of merger discussions has been an outright failure: Arab-Malaysian Merchant Bank (AMMB) Holdings' talks with the Sarawak-based Utama Banking Group broke down because the politically-connected Utama Bank (owned by the family of Sarawak's first minister) insists on maintaining management control, and it's not clear how that's possible within Bank Negara's 10-group framework. Talks also broke down between Multi-Purpose Bank and MBf Finance, which is now likely to be absorbed by the Arab-Malaysian Banking Group, though discussions continue. And regulatory approval is pending on the deals by Maybank, Public Bank and Affin Bank (respectively the first-, third- and fifth-largest groups).

It started out as an apparently simple solution to one of the numerous problems affecting crisis-hit Indonesian companies.

Taiwan's financial sector is expected to be the birthplace of at least four new asset management companies (AMCs) in the next six months, thanks to changes to the island's banking law. Taiwan's Chinatrust Commercial Bank and Goldman Sachs started the AMC ball rolling by signing a memorandum of understanding for an asset management joint venture in January. Another experienced AMC operator, Lehman Brothers, aims to establish an AMC by the second quarter of 2001. Meanwhile Morgan Stanley has thrown its hat in the ring and several domestic players, including the local Bankers' Association, are spearheading other AMC proposals. In a banking system weighed down by high non-performing loan (NPL) ratios, the occasional loan scandal and even forecasts of an impending financial crisis, the formation of an AMC framework sounds like common sense. It's odd to discover, therefore, that those in the know are greeting the AMC phenomenon with only muted enthusiasm.

The Asian bond market is gearing up for on-line business. Despite the fact that the market has so far failed to take off, banks and non-bank players seem to believe that being at the front of the queue is better than waiting for the market to mature. Some big names have even gone so far as to invest in two or more Asian bond trading portals. JP Morgan is one. The bank teamed up with Bloomberg to bring JP Morgan Express (JPeX) to Asia. The portal, says the bank, is the region's first fully-automated, real time 'click and trade' on-line bond trading platform. It also has a stake in other bond portals, including Asia-BondPortal (ABP). And the bank is keen to emphasize the uniqueness of its new business. Bernhard Eschweiler, managing director at JP Morgan Chase, explains: "JP Morgan Express allows investors to enjoy instantaneous price discovery and speedy execution time. In addition, the platform trades the most liquid bonds in Asia whereas the others target illiquid bonds and just provide a kind of match making process."

Mandates have been announced for some of the most highly-sought roles of the coming year: the arranger slots on the privatizations of China Telecom and Bank of China. But how are these selections made? By Pauline Loong.

Last year saw some truly groundbreaking transactions, particularly Chinese equity issues and anything at all to do with PCCW. Choosing between them was not easy, but we are pleased to applaud our winners. By Chris Wright.