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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (1111)	1/12/1999 1:54:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

No free lunch for foreign lenders to China's Gitic Trust - NYTimes "China Gives Foreign Creditors a Rude 1999 Awakening" By MARK LANDLER HONG KONG -- China's relations with the international banking world may go into a deep freeze after its decision over the weekend not to bail out foreign creditors of a debt-ridden investment-trust company. More than 100 foreign creditors of the Guangdong International Trust and Investment Corp., known as Gitic, were told Sunday that the company would file for bankruptcy. The move will put the foreign banks at the end of a long line of creditors clamoring for repayment of Gitic's $4.3 billion in debt. "There's a lot of anger," said one executive at a financial company that has loans outstanding to Gitic. "The general tone of the meeting is that they were disorganized and unresponsive to the needs of the creditors." The executive, who spoke on the condition of anonymity, said the creditors were particularly shocked that the Chinese government was unwilling to repay loans that were registered with the State Administration of Foreign Exchange. Historically, Beijing has guaranteed these loans with state money. Still, despite the ill will, some analysts said they doubted that foreign creditors would cease lending to Chinese companies. Chinese officials have gone to pains to say that Gitic's bankruptcy is an isolated case rather than a harbinger of financial distress throughout China's state-owned companies. Some analysts also said Beijing might be sending a message that it would not bail out foreigners who lend indiscriminately to provincial companies. "This is not a decision taken lightly," said T.L. Tsim, a strategist who follows China for his consulting firm in Hong Kong. "It is obviously a setback for the banks. But the government probably took the view that the banks needed to know there was risk to supporting these companies." Although analysts warn that other investment-trust companies may follow Gitic into insolvency, China still seems a safer bet than other Asian economies. While Japan, Indonesia and other Asian countries are mired in recession, Beijing predicts that its economy will grow 7 percent this year. In a display of its economic muscle, the Chinese government raised $1 billion in a global bond offering last month -- doubling the size of the offering after investors flocked to buy the dollar-denominated bonds. "Bankers will go where the money is," Tsim said. "Creditors may want extra guarantees, but how can you ignore the opportunities of the China market?" To creditors of Gitic, however, China looks like a decidedly inhospitable place. After lending on the assumption that the provincial or central government would guarantee their loans, the creditors were stunned to discover that they would be treated like any other lender. In fact, under Chinese law, Gitic's 25,000 individual creditors will be repaid from Guangdong provincial money, while the foreign banks will have to seek repayment through protracted bankruptcy proceedings. Given that Gitic's liabilities outweigh its assets by $1.7 billion, the odds of these creditors recovering their investment through such a process are slim. What frustrates creditors is that after three months of scrutinizing Gitic's finances, a liquidation committee appointed by the People's Bank of China is still unclear about many details. Although the committee made fresh estimates of Gitic's assets and liabilities, it drew no distinction between senior and subordinate debt and gave few clues about how the bankruptcy would be handled. "The level of disclosure has been very poor," said the executive from the Gitic creditor. "The whole thing was handled very unprofessionally." Certainly, Gitic could serve as a case study of the dangers of throwing money at Chinese ventures. The company, based in the provincial capital of Guangzhou, was established in 1980 as the main fund-raising arm of the Guangdong government. Riding the wave of China's most economically fertile region, Gitic expanded into everything from securities trading to silk textiles. By last fall, however, it was sinking under billions of dollars in debt to creditors like HSBC Holdings and Bank of East Asia. In its first surprise move, Beijing shut down Gitic on Oct. 6. Then, in late October, the company missed an interest payment on a $200 million international bond. Perhaps the most alarming part of the Gitic saga is its mushrooming debt. At first, analysts estimated that the company owed about $2 billion. The news that it owes more than twice that shocked creditors. Gitic is not the only government-owned company in Guangdong to run into financial trouble. The province recently hired Goldman, Sachs & Co. to advise on a reorganization of Guangdong Enterprises Holdings, a conglomerate based in Hong Kong that the government also owns. Goldman, Sachs served as the lead manager of the central government's $1 billion bond offering. Now the firm has a chance to return the favor to Beijing: Under the terms of its agreement with Guangdong, Goldman's partners promised to buy a $20 million stake in Guangdong Enterprises. Copyright 1999 The New York Times Company

To: porcupine --''''> who wrote (1111)	1/12/1999 11:00:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

1998 Record Year for GM Mexico; Sales Surge Over 23% Local sales of the Mexican unit of GENERAL MOTORS CORP rose a strong 23-24% in 1998 over the previous year to a record 175,114 vehicles, company president Troy Clarke said. Clarke told reporters the sales volume was an "all-time record" for GM Mexico. Clarke added that 1998 was a record year for the entire Mexican automobile industry and estimated overall sales growth of 34% for the sector. However, he said GM only expected car sales to increase 4.0-5.0% in 1999 as the economy slows down. Clarke said export growth for GM Mexico was around the same level as for overall sales in 1998. GM Mexico exports half of its product to the United States, Canada and Australia. (Reuters 02:14 PM ET 01/08/99)