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SCMP Reporter

Hong Kong bankers expressed confidence in a successful restructuring of insolvent Guangdong Enterprises (Holdings) (GDE) after meeting Premier Zhu Rongji.

 Hopes that creditors would not be forced to accept a cut in loan principal repayments, or 'haircut', rose following yesterday's meeting.

 'We don't expect a haircut,' said Standard Chartered regional executive director Mervyn Davies.

 A Hong Kong Association of Banks delegation met Mr Zhu for an hour and a half, with the GDE restructuring dominating the discussions.

 GDE and its financial adviser, Goldman Sachs, are expected to announce details of the long-awaited restructuring on Tuesday. The firm, the Hong Kong investment arm of the Guangdong provincial government, had negative worth of $13.89 billion as of December.

 The issue of a possible cut in loan principal has been a key bone of contention, with creditors fiercely resistant.

 Mr Zhu told the delegation he had strong confidence a viable restructuring of GDE would be achieved, according to delegation leader and Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong.

 However, Mr Zhu gave no concrete assurances creditors would not be forced to take a cut in loan principal. This was a decision for the Guangdong government, he said.

 Nevertheless, the meeting discussed some of the potential steps by which GDE's debts could be restructured, including injection of new assets and debt-to-equity swaps.

 'Premier Zhu has made clear his strong confidence in arriving at a good restructuring result,' Mr Yam said.

 Mr Zhu called for creditors' co-operation in the restructuring process and urged them not to be over-aggressive in pushing their claims.

 Mr Yam said any cut in loan principal would depend on the restructuring outcome.

 'For example, if a debt-to-equity swap option is adopted, we still have to look at the valuation at which the equities will be swapping with the debt positions,' he said.

 'If the valuation is lower than the market price you can say it is a haircut. But it can happen the other way round. There is no final decision yet.'  Hong Kong Association of Banks chairman Liu Jinbao said members felt their confidence had been greatly strengthened.

 'I think we can be sure that the Guangdong provincial government is taking GDE's restructuring as its top priority and will try its best, under the existing legal framework, to fully consider creditor banks' concerns and minimise their losses,' he said.

 The delegation also met People's Bank of China governor Dai Xianglong.



Zhu lifts hope over creditor payout by GDE