Prachai v. the Government | 23.04.05
You read it right. It’s Prachai versus the government.
The name Prachai Leophairatana used to appear quite regularly in The Economist and BusinessWeek but hasn’t for almost two years despite many interesting developments. So here I am scooping at least those two august publications. Who says bloggers don’t report?
First, a refresher: Prachai was CEO and the effective owner of Thailand Petrochemical Industry, an oil conglomerate whose $3.7-billion debt default was Thailand’s largest following the 1997 financial crisis. As part of the bankruptcy proceedings, creditors took over and installed a planner to administer the company’s rehabilitation. Stripped of his executive powers, a defiant Prachai waged vicious legal, political, public relations and even physical battles (the last kind through incited labor unionists) to derail the restructuring and regain control of his former company. These battles were turning into a full-fledged war during the lead-up to the 2001 general election, which would saw Thaksin Shinawatra elected prime minister.
Below are some examples of international media reports from that period, which — surprise, surprise — cast Thaksin solidly in on the side of Prachai, the unrepented Mr. Rip-off.
The Economist, December 7, 2000:
Although the court was supposed to rule on the plan last week, [Prachai] managed to get this delayed until December 12th. If he can stall a little longer, he may yet be spared. Thaksin Shinawatra, a business tycoon who has called for more government bail-outs, is expected to win the parliamentary elections on January 6th. If the courts do not decide TPI’s fate, perhaps politics will.
BusinessWeek, January 15, 2001
The situation was looking grim for the nation that triggered Asia’s economic meltdown. Thaksin Shinawatra, a tycoon and leading candidate for Prime Minister, had proposed a dubious moratorium on paying Thailand’s $36 billion in corporate debt. Meanwhile, the politically powerful Senator Prachai Leophairatana was blocking a painful workout of $3.5 billion in debt at his company, Thai Petrochemical Industry. Prachai and TPI had come to symbolize Thailand’s inability to clean up in the aftermath of the 1997 crisis.
Asiaweek, April 27, 2001:
And with the new administration of Thaksin Shinawatra indicating that it might ease the rules for debtors, there are fears that all the work so far will be undone and Thailand will revert to the old credit culture in which defaulting carried no real penalty.
The same narrative, if slightly more nuanced, persisted in 2003, when Prachai succeeded in booting the creditor-appointed administrator with the help of a shady court ruling and the government proposed a new team in its place.
The Economist, June 19, 2003:
Since then, the court has rejected the creditors’ choice of administrator, and announced that the government should run the company instead.
That was when the affair began testing the government’s commitment to reform. It is currently suggesting that the company be run by a committee of representatives of both Mr Prachai and the creditors, with a government official in the chair to keep the peace—effectively condoning the abrogation of the creditors’ rights.
All of this squares with the philosophy of Thaksin Shinawatra […]
BusinessWeek, July 28, 2003
Negotiations over the fate of insolvent refiner Thai Petrochemical Industry highlight [Thaksin’s] conflicting signals. TPI owes $2.7 billion to more than 100 creditors, many of them foreign, but has fought them off for six years with a series of 37 lawsuits. In June, the Ministry of Finance took over TPI, leaving founder Prachai Leophairatana as an adviser and removing the Australian accounting firm that creditors had chosen to run the company. Although that was hardly the outcome the creditors had sought, on July 7 they approved the changes — for fear of getting cut out of any debt restructuring, according to a senior manager at one of the banks.
But a funny thing happens on the way the predicted debtors’ paradise. Prachai kept on challenging and undermining the supposedly sympathetic new administrator, only to suffer one legal defeat after another.
The Nation, April 6, 2005:
Thai Petrochemical Industry Plc (TPI) founder Prachai Leophairatana has suffered another blow, with the Constitution Court yesterday ruling that he must take responsibility for a US$460-million (Bt18-billion) loan guarantee.
The Nation, April 7, 2005:
The Central Bankruptcy Court on Friday ordered an end to mediation between Thai Petrochemical Industry Plc (TPI) founder Prachai Leophairatana and the Finance Ministry, a ministry source said.
The ministry will now start allocating new shares to the company’s new strategic partners in line with TPI’s debt-restructuring plan, the source said.
The Bangkok Post, April 9, 2005
The Central Bankruptcy Court yesterday dismissed a suit by Prachai Leophairatana, the founder of the troubled Thai Petrochemical Industry plc (TPI), seeking to remove the company’s plan administration team appointed by the Finance Ministry.
It gets better. The Bangkok Post has been playing up yet another one of those government-trying-to-silence-media allegations involving radio talk show host Anchalee Paiseerak. The latest “inside” dope (scroll down) casts the spotlight on Democrat MP Korn Chatikavanij in what I see as an attempt to boost Khun Anchalee’s credibility:
You're listening to troubled radio
Korn Chatikavanij has had a busy two months. He won election for the first time on Feb 6 as the Democrat MP for Bangkok’s Sathorn district and last month he made his debut as a political show host on the FM 92.25 community radio station.
Mr Korn was invited to join the station by well-known radio commentator Anchalee Paireerak, but FM 92.25 has since encountered trouble after it was accused by the authorities of operating illegally by exceeding the 30-Watt transmission limit and by using an antenna higher than the permissible 30m.
Mr Korn said he did not know if the checks into the station equipment were politically motivated or discriminatory, or if the station had done anything technically wrong. He claimed to be simply an unpaid programme host with no financial interest in the station.
Not much of a boost, if you ask me, since he essentially said he had nothing to say and tried to distance himself from the program. Still, Khun Anchalee and the Bangkok Post can probably count on the magical sway power of MP Korn’s Oxford pedigree on Thailand’s smitten “educated” class, regardless of his actual words. There was, however, another familiar figure in the article — tucked neatly away at the very end — whose reputation may not rub off so well:
A Government House source said the TPI building which houses the radio station was 38 storeys high and belongs to the family of Prachai Leophairatana, the founder and former chief executive officer of TPI Co who is at odds with the government after it ordered the Finance Ministry to take over the planning of his company after it accumulated onerous debt. Mr Prachai is fighting to take back control of TPI.
A government insider said Mr Prachai might be pleased to be able to irritate the government and Ms Anchalee and Mr Korn might be unwitting pawns.
Well, I’m not so sure about the “unwitting” part. Is the Bangkok Post unwitting, too, in portraying Prachai almost as a victim of a nationalization scheme? Is it also unwitting in not drawing any attention to the “38 storeys high” bit and instead keeping it three paragraphs apart from where the 30-meter height limit is mentioned. (A quick calculation: 38 floors at 3 meter per floor will rise to 114 meter. Put an 18-meter antenna on top of that and the total height becomes 132 meter, more than four times the stipulated maximum.) Too much of coincidence, methinks.
While we’re at it, you might also ask yourself how Prachai is so personally wealthy — the 38-storey building is but one of his myriads of assets — while the company he found, managed, and still now stakes a claim to is saddled with gargantuan liabilities. Whatever your answer is, you can’t blame it on the Thaksin government.
P.S. Since the latest court ruling was delivered on April 7, TPI’s stock has soared 23% from 8.60 to 10.60 baht per share. Now this is something you may hold the government accountable for.
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- JW 17.10.05
[The following is a copy of the comment JW made on another thread. I put it here because it is, in fact, a comment on this post. –Tom]
In regards to your criticism of the international media for portraying Thaksin as being sympathetic to Prachai, I do think you are being a little bit unfair because Thaksin’s pre-2001 election statements certainly suggested this would be the case.
Thaksin’s election policy was for the government to get more involved in restructuring the debts of the companies concerned. After the unusual decision of the Bankruptcy Court in 2003 to allow the Ministry of Finance to administer TPI, the government was finally involved in restructuring TPI. At this point in time, given Thaksin’s previous statements and what you refer to as his flirt to the ‘dark side’, I think there were good grounds to be concerned about what would happen. Prachai, ever the optimist, certainly thought so.
It is easy with the benefit of hindsight to say the international media were wrong, but even in the middle of 2003, Thaksin was still making statements about amending the bankrputcy law to make it fairer which given his previous statments were interpreted to mean a change to the benefit of debtors and hence Pracha.
It wasn’t really until 2004 that Thaksin did really show his true hand and it became apparent that things weren’t going to go in Prachai’s favour. This caused Prachai to join up the following cabal of wackos to unite against Thaksin:
Those who made their way to the news conference to support Ekkayuth included Prachai Leophairatana, the former chief executive of Thai Petrochemical Industry Plc, Amarin Khoman, and core leaders of other activist groups including the labour unions of the Electricity Generating Authority of Thailand and other state enterprises. The Nation