Forum on Asian Insolvency Reform

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Forum on Asian Insolvency Reform

• Steve Miller
• Partner

26 April 2006
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Introduction

• Creditors prefer to participate in a predictable
  process

2001 Judge Wisit Wisitsora-at with a more
centralised approach many issues will be decided
successfully by the same group of judges. This
will enhance predictability of the Court and the
law.

• 5 years on - are creditors happy to participate
  in Thailand?

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Introduction (contd)

• In examining this question I look briefly at

Power struggle between debtors, creditors and
insolvency practitioners
Classification of creditors into voting classes
Proofs of claim
Voluntary v. Involuntary participation
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Power struggle
Insolvency Practitioner
Debtor
Creditors
Natural tension
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Power struggle (contd)

• Appointment of the plan preparer (insolvency
  practitioner)
• drives the process
• 66 2/3 rule debtor friendly

• TPI case
• Effective Planners Limited
• Ministry of Finance

• Tension became open warfare

• Conflict delayed process several years

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Power struggle (contd)
Central Bankruptcy Court attempted solution
the appointment of TAL is unsuitable
where there is a climate of confrontation
and distrust between the Debtor and the
Creditors TAL should not therefore be appointed
as the new Plan Administrator.
Is the conflict from this entrenched tripartite
power struggle reasonable?
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Classification of creditors

• Secured creditors holding 15 or more of the debt
• Other secured creditors
• Unsecured creditors
• Subordinated creditors

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Proofs of claim

• Tensions rise over classification
• Claims similar nature same class
• (1) unsecured trade
  (2) unsecured bank
  (3)
  unsecured judgment creditor
• Siam Strip Mill
• related party Siam Power
• no power plant
• admitted 56 of debt (THB 35 billion)
• in its own class
• approve plan over all other creditors

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Involuntary creditor participation

• in Phayathai Hospitals the Supreme Court ordered
  a solvent company back into liquidation
• tension debtor v. plan administrator
• plan successful - Central Bankruptcy Court ends
  formal reorganisation
• debtor objecting - plan administrator caused
  damage
• 2 years later debtor persuades Supreme Court
  return Phayathai to reorganisation

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Involuntary creditor participation(contd)

• Issues include
• Phayathai was solvent (need to be insolvent to be
  in reorganisation)
• New creditors forced into reorganisation process
  - unexpected / uncertain
• Conflict took too long to resolve

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Voluntary creditor participation

• Active debt trading
• debtors
• banks
• vulture funds
• Information is available under the process
• Antecedent transactions capable of review not
  always a priority

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Conclusion

• Thai process is working
• Conflict inevitable most systems
• Problem lies in
• delay in Court rulings
• inability to prevent frivolous claims

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Any questions?
Thank you