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To: Arik T.G. who wrote (2510)	1/10/1999 1:45:00 PM
From: Box-By-The-Riviera™	Respond to of 3339

Sunday January 10, 8:34 am Eastern Time WOW.....prisoners will be fed before creditors....that's a new twist. Brazil's Minas Gerais warns may not pay Eurobonds By Vanessa Viola BELO HORIZONTE, Brazil, Jan 9 (Reuters) - The rogue governor of Brazil's Minas Gerais state, Itamar Franco, warned on Saturday he would only pay upcoming Eurobond obligations if the region's local financial needs could first be met. ''If we have money after paying for state workers' salaries and paying for our prisoners' food, then no problem,'' Franco said. Minas Gerais rocked global financial markets last week by suspending payments on $15 billion in debt to the federal government in open defiance of the president and his fiscal austerity drive. Franco has further worried international investors by refusing to clarify his position on the state's outstanding Eurobonds, $108 million of which are set to mature next month. ''Eurobonds, I will begin to study that on Monday,'' Franco told reporters assembled at the governor's mansion. He added that Brazil's Finance Minister Pedro Malan was in no position to guarantee payment on the state's Eurobonds, as he did last week by pledging to seize $78.3 million in Minas Gerais funds held in a federal bank account. ''This is a deal between Minas and a private bank,'' Franco said. ''So, there is no room here, constitutionally, for interference by the Finance Ministry.'' The political feud comes at delicate moment for President Fernando Henrique Cardoso, who is struggling to maintain enough momentum in Congress to pass painful budget cuts needed to qualify Brazil for a $41.5 billion international rescue package. Cardoso issued a stern warning to Minas Gerais on Friday in an attempt to shore up flagging investor confidence in the world's eight-largest economy, which lost $1 billion in a hemorrhage of dollar outflows last week. ''I will not allow the law to be ignored. The most senior authority in this country is the president,'' Cardoso said. But Franco, who was president between 1992-1994, refused to comment on Cardoso's threats and made a joke about the damage his debt moratorium inflicted on Brazilian shares and emerging markets across the globe. ''I am very worried because my stocks in Tokyo fell...My stocks in Hong Kong fell and in New York they fell,'' Franco said. ''Since I have so many stocks in Hong Kong, Tokyo, and New York...I am therefore worried.'' Franco appointed Cardoso as his finance minister when he was president, but has become increasingly critical of his former aid. He accused Cardoso of neglecting Brazil's social ills and taking all of the credit for a popular anti-inflation plan announced by the finance ministry during Franco's term.

To: Arik T.G. who wrote (2510)	1/10/1999 1:48:00 PM
From: Box-By-The-Riviera™	Read Replies (1) \| Respond to of 3339

intersting trouble brewing near shang-ril-la..... sorry, having tloubre with my l (r)'s and r (l)'s.... Sunday January 10, 9:52 am Eastern Time China's GITIC bankruptcy plan deals blow to banks By Michael Kramer GUANGZHOU, China, Jan 10 (Reuters) - In a blow to foreign creditors, China said on Sunday it would seek to wind up a major trust firm and send banks to the back of the queue for repayment of over $4.0 billion in debt. Trustees of the Guangdong International Trust and Investment Corp (GITIC), once one of China's best known borrowers on world capital markets, said they would file for bankruptcy, shrugging off the impact on China's future credit stance. Shortly after a two-hour meeting with creditors of GITIC, already closed, an assistant to Guangdong's provincial governor said there would be no priority treatment for foreign banks. ''To my knowledge, China's bankruptcy law does not provide for priority to foreign creditors,'' Wu Jiesi told reporters. China's bankruptcy law favours employees and other individual creditors, and bank creditors rarely use it to recover overdue loans. Foreign and domestic bankers greeted the news grimly. ''I expected the worst case scenario and I got it,'' said a foreign creditor, one of more than 100 who attended the meeting in Guangzhou, capital of the southern province. ''This will mean a lot of banks will have to make provisions for losses,'' said the banker, who declined to be identified. GITIC, an arm of the Guangdong provincial government, was closed by the central bank in October for being unable to repay debts. Creditors were given until January 6 to file claims. Some bankers had believed that China might stand behind all the company's foreign debts as long as they had been registered and approved by financial authorities. ''Governor Dai has said registered debt would be given priority for repayment. He did not say it would be fully repaid,'' Wu said. Dai Xianglong is the head of the central bank, the People's Bank of China (PBOC). Wu also heads the liquidation and trustee committee set up to administer GITIC's debts and assets. In Hong Kong, the head of the Monetary Authority, the de facto central bank, said it would not require banks to make provisions for bad loans to GITIC. ''I hope banks can study the information available and make their own decisions. I do not think it is necessary for the monetary authority to issue guidelines,'' Joseph Yam told reporters. ''This is an isolated case, an individual company's situation.'' ''It is difficult to say how much of registered debt will be repaid or if it will have priority,'' Yam added. ''Before, the PBOC said registered debt would have priority, but whether the courts say so is not clear now.'' GITIC has some 240 creditors, including 135 foreign institutions, among them BoT-Mitsubishi Bank , HongKong Bank (quote from Yahoo! UK & Ireland: HSBA.L), the Bank of East Asia and Merrill Lynch (NYSE:MER - news). GITIC was said to have 36.17 billion yuan ($4.37 billion) in liabilities and 24.17 billion in assets. ''GITIC's board decided to file for bankruptcy because of massive internal and external debt, extremely chaotic management and liabilities that seriously exceeded assets,'' Wu said. He said the bankruptcy proposal would treat all creditors equally, much like practice elsewhere. Asked if he was worried about the impact on future foreign borrowings he replied: ''Americans don't worry (about such practices), Thais don't worry and Hong Kong compatriots don't worry. As a Chinese, I don't worry either.'' Bankers said China's successful sale last month of $1.0 billion in global bonds -- despite the problems with GITIC -- may have emboldened authorities to take a tougher stance on the repayment of the debt of a government company. Wu also said that some 20,000 individual depositors at GITIC would get back their money, totalling some 779 million yuan. ''If that were not handled carefully, it could affect social stability,'' he said. China has no deposit insurance scheme for its financial system. ($1.0 equals 8.28 yuan)