If Picnic wants to settle the dispute, reduction of the conversion price is the solution, he said.

"In a situation where a company has a [default] problem, who will get the company's assets first - creditors or shareholders? Absolutely, creditors are first in line. Besides, the conversion price has been set at Bt1, which is far below the current market price. Picnic's action seems like it doesn't want to solve the problem, it wants to buy time," he said.

Krungthai Asset Management has already sued Picnic in the civil court to recover its money and is now considering filing a criminal action, he said.

Shareholders could also take legal recourse against Picnic's executives, as the company did not use the proceeds from the share allocation to repay its debts as stated in its capital-increase plan, he said.

Picnic said in a filing with the Stock Exchange of Thailand that the company had proposed to repay its debts from bills of exchange by a debt-to-equity conversion as approved by shareholders on March 21, 2006.

"After the creditors accept the proposal, the company will report to the company's board of directors and proceed with the procedure," the company said.

Three mutual fund companies holding Picnic B/Es worth Bt220.63 million, excluding accrued interest, have sued the company.

Picnic said the company's creditors holding B/Es worth Bt291.49 million have not yet taken legal action against the company and it has been paying the contracted interest rate of 2.5 per cent.

A year ago, Picnic announced its hefty recapitalisation plan by allocating 1.48 billion shares through a rights offering to its existing shareholders at one new share for every two shares held. The striking price was set at Bt1.

Out of the proceeds, 65 per cent were to be used to repay its debts, 25 per cent to expand its energy and engineering business, and the remainder to boost working capital.

However, the offering flopped with a mere 136,585 shares exercised. A creditor source said his company would not accept Picnic's proposal to convert its debts into equity.

"The debtor can't force us to accept the proposal. The company has talked about the debt-to-equity swap for a long time, but it has never done it. My firm has yet to receive any information from the debtor," the source said.

The proposal could go through if the large creditors give their nod to it, he said.

"If the large creditors endorse the plan, we might accept it as well. However, it depends on our unit trust holders," the source said.

Picnic will not ask the Central Bankruptcy Court to step in because the court recently ruled that Picnic's assets exceed its liabilities, the source said.

Companies in general can go bankrupt under the court when they show negative net worth.

Picnic in the first nine months of last year was still mired in a net loss of Bt1.23 billion. 

Piyarat Setthasiriphaiboon

The Nation