The Stock Exchange of Thailand (SET) has asked Eastern Wire Plc (EWC) to explain a transaction involving seven account receivables that Siam General Factoring Plc recently made to settle a Bt500-million debt. The SET is concerned about possible connections between EWC and the seven trade debtors.

EWC must explain the transfer by Tuesday.

The seven account receivables involve Bt190 million from JJ Land Development, Bt120 million from Rama 9 Trading and Service, Bt60 million from Theerapat Industry Corporation, Bt50 million from Net Active and Service, Bt30 million from both Sahaphon Transport and Sri Pattana Textile, and Bt20 million from Pracha Weaving Industry.

Five of the seven companies have relationships with Eastern Wire.

lThe SET said Eastern Wire had previously lent Bt328.7 million to JJ Land. The loan came due in August last year, but the company secured an extension from Eastern Wire until September last year.

lKomgrich Luechanya, who holds a 96.99-per-cent stake Rama 9 Trading and Service and also serves as that company's director, was a business partner in Ua Withya Plc. Eastern Wire once bought an additional transfer of claim for Ua Withya debt from Komgrich.

lSuchanya Lapvisutisin, who holds a 50-per-cent stake in Theerapat Industry Corporation and has served as the company's director since March 24, 2005, has a 10-per-cent stake in Union Gas and Chemical (Union). Rattana Sathienwari, who holds a 67-per-cent stake in Sahaphon Transport, has a 9.99-per-cent stake in Union Gas and Chemical.

In the first quarter of last year, Eastern Wire made an Bt80-million advance payment to Union to purchase raw material for a subsidiary. Union was not able to deliver the raw material and returned the full amount of the advance payment plus other compensation on June 1, 2005.

l The SET found that World Gas (Thailand), a wholly-owned subsidiary of Picnic Corp Plc, owns Net Active and Service. Picnic is a joint partner with Eastern Wire in Enersol Co Ltd.

The SET has asked Eastern Wire to clarify whether it and SGF had any agreements requiring SGF to provide preferential treatment to any of the companies whose accounts were transferred in the debt deal.

"The conditions in the agreement between Eastern Wire and Siam General Factoring stated that SGF was able to repay debt by transferring its receivables. Later, JJ lands, once the default account receivable, is one of the seven account receivables. Have the remaining two-to-seven account receivables ever been the Eastern Wire's account receivables? What are relationships between the total seven account receivables and Eastern Wire? Please provide information regarding the shareholders, boards of directors and types of business of each account receivable," the SET said.

Eastern Wire had earlier filed a lawsuit against Siam General Factoring after the latter transferred the account receivables to settle a Bt500-million debt connected to two batches of promissory notes (P/Ns) that Siam General Factoring had issued, as Eastern Wire prefers cash repayment as stated in the new agreement.

The transaction happened while the two sides were negotiating a draft agreement to transform the P/Ns into a long-term loan agreement. The agreement also set new repayment conditions between the two companies, under which Eastern Wire would stop accepting either cash or account receivables to cover outstanding debt, and instead accept only cash.

Meanwhile, the SET asked SGF to provide information on the business arrangements between it and the seven companies.

EWC earlier this week reported a second-quarter net loss of Bt516.32 million after setting aside reserves to cover a doubtful Bt500-million loan to Siam General Factoring. Siam General reported a second-quarter net loss of Bt587.66 million because of allowances for doubtful debt.

Siriporn Chanjindamanee

The Nation