[February 16, 2006]

Subsidiaries of Shin could face change: Some units may be forced to restructure

(Bangkok Post (Thailand) (KRT) Via Thomson Dialog NewsEdge) Feb. 16--Questions continue to plague the Shin Group on whether further shareholding changes will be required within its subsidiaries in the wake of last month's Temasek takeover.

Yesterday, Shin announced that it was restructuring its shareholdings in budget airline Thai AirAsia. Under the new structure, a new company, Asia Aviation, would be set up with Shin holding 49 percent and Sittichai Veerathummnoon holding 51 percent.

Asia Aviation will purchase 50 percent of Thai AirAsia from Shin for 400 million baht, or 20 baht per share.

The transaction comes after last month's purchase of a 49 percent stake of Shin Corp by Singapore's Temasek Holdings for 73.3 billion baht. The transaction, which has also triggered a mandatory tender offer running through March 9, has raised questions on whether Shin subsidiaries were now in violation of foreign shareholding restrictions given Temasek's holdings.

The Temasek purchase was structured to maintain Shin's status as a Thai company through a number of different holding companies.

Thai AirAsia, 49 percent held by Malaysia's AirAsia, was forced to restructure the Shin shareholdings to avoid ownership restrictions.

Some Shin executives said further group restructurings were unnecessary as Thai ownership remained well over 50 percent, although others acknowledged that public pressure could force some "cosmetic" changes.

One Shin executive said Thai AirAsia was a distinct case from other subsidiaries, as the budget carrier was already at the full statutory limit for foreign shareholders.

Broadcaster iTV and Shin Satellite, however, saw its foreign shareholding maintained primarily by foreign institutional investors through the foreign board. In the case of Advanced Info Service, Singapore Telecom is the largest foreign shareholder, but with only 21 percent.

"For the three subsidiaries, the 49 percent foreign limit under the Foreign Business Law has not been violated. So I don't think it would be necessary to set up a new structure," the executive said.

Thai AirAsia had been pressed to restructure in part by authorities at the Aviation Department who had argued that changes were needed if it was to retain its aviation rights.

Anuparp Thiralarp, president of the Thailand Telecommunication Management Academy, said Thai AirAsia changes were aimed at avoiding violation of Foreign Business Law.

However, he said it was likely that other Shin subsidiaries could be forced to change, and noted a Council of State ruling regarding land purchases by foreign companies through Thai nominees had focused on the fact that ultimate control was held by foreign entities, even though direct holdings had been made through Thai entities.

Meanwhile, a Finance Ministry official commented that shareholding changes at Shin did not have any impact on the standing of consumer finance operator Capital OK.

The Finance Ministry issued regulations last June for the operations of non-bank lenders, which called for them to have at least 50 million baht in registered capital and apply for a licence from the ministry.

"[Capital OK] is a juristic person. Whether it can operate depends on the Ministry of Commerce's considerations under the framework of the Foreign Business Act. The ministry itself does not focus on its shareholding structure," the official said.

The regulations for non-bank lenders focused on the 28 percent interest-rate cap and risk management, the official noted.

Capital OK was previously 60 percent owned by Shin Corp and 40 percent by Singapore's DBS Bank.

The Foreign Business Act of 1999 does not place lending as a restricted business for foreigners.

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