Fish Packer Surat's Travails Are Thais' Problems in a Can

[Dennis L. Fiddle]

[wsj.com]
April 2, 1998

Fish Packer Surat's Travails [Image]
Are Thais' Problems in a Can -----

By PICHAYAPORN UTUMPORN [Image]
Staff Reporter of THE WALL STREET JOURNAL

BANGKOK, Thailand -- Earlier this week, Surat
Canning PCL's stock was finally delisted -- two
months after the seafood packer's entire board
secretly quit, and seven years after it reported
its most recent annual profit.

For much of the decade, Surat Canning has been
treading toward financial gloom. Its activities
highlight the perilous cocktail of questionable
management and regulatory oversight that, combined
with a weak financial sector, contributed to
Thailand's current hangover.

Consider that as long ago as 1992, Surat Canning
agreed to a major land purchase -- but waited four
years to disclose it, even though Surat and the
company selling the land had ties between their
corporate boards. Then, about two years ago, when
the Stock Exchange of Thailand finally began
nudging the company to improve itself, Surat's
options among Thailand's restructuring experts
eventually turned out to have management
difficulties of their own: The two finance
companies Surat hired as advisers were later among
those closed down by the government for insolvency.

"There are a lot of similar cases" to Surat Canning
in Thailand today, says one foreign banker, whose
institution loaned money to the company in the boom
years.

Surat Canning was formed in 1984, and by 1990 had
obtained a listing on the SET as a producer of
canned seafood mainly for export. It produced
canned shrimp, squid, tuna and sardines under the
brand name Samui Island. By the early 1990s Surat
was expanding overseas, entering joint ventures in
Vietnam and building a special boat for a trial
fishing project in Indonesia.

However, as early as 1991, trouble was beginning.
That year, Surat recorded an annual loss of 9.39
million baht (equivalent to $238,500 at present
conversion rates). It was the first in a string of
consecutive losses that would eventually provide a
key reason for the delisting.

In February 1992, Surat's board approved a major
land purchase from Ekpanich Farm Co. -- a company
whose board at the time also included one Surat
board member, plus the wife of another Surat board
member. But Surat "didn't even tell their
shareholders" about the purchase plan, an official
from the stock exchange says.

Surat eventually did describe the 1992 purchase
plan in a SET filing dated September 1996 -- more
than four years after the fact. According to a
stock-exchange official in the investor-relations
department, the deal was valued at about 115
million baht in 1992; at that time, Surat's capital
totaled about 90 million baht, according to SET
filings.

The SET considers this a clear violation of
stock-exchange requirements for disclosure of
material financial information, an exchange
official says. Typically, such a violation would
lead to a written warning, and possibly a temporary
trading halt or even a fine, the SET official said.

The director who served on both boards at the time
the plan was approved, Nakorn Pornpanich, resigned
from Surat's board in September 1996. He couldn't
be reached for comment. The board member whose wife
served on Ekpanich's board, Songkiat Phisitkul
(also a former Surat president), didn't return
phone calls seeking comment, and his wife couldn't
be reached for comment.

In 1991 Surat Canning also set up two joint
ventures in Vietnam: Surat Kien Giang Fishing Co.
and Surat Kien Giang Marine Food Processing Co. The
Vietnamese government revoked Surat Kien Giang
Marine's license in 1993, only a few months after
the operations were launched, according to
officials at the People's Committee in Kien Giang
province in southern Vietnam. Surat Kien Giang
Fishing's license was revoked later due to a lack
of profitability, officials at Kien Giang's
People's Committee said.

Since then, no representative from the Thai company
has been back to Vietnam to liquidate the company,
Vietnamese officials said. Surat's investment in
both ventures totaled about 76.7 million baht,
according to a financial statement for the quarter
ended March 31, 1995. Most of that amount was spent
on factory equipment.

In February 1996, the SET gave an official warning
to Surat that it risked being delisted, citing five
consecutive years of losses. In response, Surat
appointed CMIC Finance & Securities PCL, a top Thai
finance company, to help put together a
rehabilitation plan. Less than a year later, Surat
Canning replaced CMIC with Thanapol Finance &
Securities PCL, citing cost-control measures. Both
Thanapol and CMIC were shut down by the government
in December 1997, along with other insolvent Thai
finance companies.

By 1997 the company was selling off its core
assets, its fishing boats. Surat sold one boat in
July 1997 for eight million baht, even though the
company itself had valued the boat at 17.3 million
baht, according to an SET filing on the planned
sale.

Stock-exchange officials describe these sales as a
sign of management's unwillingness to run the
company. Without that equipment, "the company
wasn't what it said it was when it asked to list on
the SET," said an official at the
investor-relations department. Under SET rules,
this would be grounds for delisting.

In the two years following the official warning of
a possible delisting, the SET demanded Surat detail
how it was spending its money, according to SET
officials. By the end of the third quarter of 1997,
Surat's loss had ballooned to 105.3 million baht
for the nine-month period, and debt totaled 539.4
million baht. It was the last earnings report
issued by the company.

Finally, on Feb. 26 of this year, two years after
its first warning, the SET announced its decision
to delist the company, effective as of Tuesday. The
decision came nearly a month after all of Surat's
directors resigned at once -- a mass resignation
that wasn't disclosed until a day later. The board
was never replaced. According to SET guidelines,
absence of management is grounds for delisting.

None of the six directors who resigned in January
-- listed by the SET as Song Kanjanachoosak,
chairman; Police Major General Chawiang Sirivato,
president of the advisory board; Thananchai
Chobmak; Rithikrai Udomveth; Captain Polasak
Sripen; and Police Captain Kittisak Naisiri --
could be reached for comment. Wongsiri Lamsam,
former chief executive officer of Surat Canning,
declined to comment for this article. "I don't have
anything to do with that company anymore," he said.
Mr. Wongsiri was appointed CEO in October 1996,
which was then a new post; he resigned 11 months
later.

The address listed as Surat Canning's Bangkok
headquarters is actually home to a
cable-construction company that has no connection
to Surat. Surat Canning's phone number is answered
by a woman who describes herself as an "assistant
to senior officials," though she wouldn't give the
names of the company's senior officials. Messages
left at that number weren't returned.

The SET has blacklisted the directors who resigned
in January, prohibiting them from becoming
directors of other public companies. Surat "doesn't
have directors who look after the interests of the
company and of shareholders," the SET said in
February. "This failure to comply with the SET
regulations can be detrimental to investors'
interests."

But apart from the delisting and blacklisting, the
SET isn't planning any further steps against Surat
or its former management, according to the SET's
public-relations officer. "We can remove the
company's shares from the SET because it violated
our rules, but that's all we can do," she said.

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--
dfi...@mn.uswest.net (Dennis L. Fiddle)
E-mail replies are welcome.