Here is a statement released by the Financial Sector Restructuring Authority (FRA) explaining the business loan sale scheduled for today. I. General Information and Revised Tranche Information General Information: The FRA intends to solicit bids for business loans, consisting of approximately 13,192 loans with an aggregate outstanding principal of about Bt371 billion as of Sept 30. The FRA also intends to solicit bids for the unsolicited bid sale, consisting of around 542 unsolicited bid loans with an aggregate outstanding principal balance of about Bt17 billion as of Sept 30.

If a bidder is eligible to participate in either the sale or the unsolicited bid sale, no additional fees and deposits are required upon submission of the applicable sales Data Files Application and Data Room Access Application. Revised Tranches and Sale Structure Business Loan Sale: Business loans will be sold in 42 tranches: 24 small tranches, 12 medium tranches and six large tranches. Ten new tranches have been added to the business loan sale, eight small tranches and two medium tranches. The business loans contained in small tranches were selected from the business loans previously contained in the large tranche.

The business loans contained in small tranches were selected from the business loans previously contained in the large tranche. The small tranches were created in response to requests from interested parties for a larger number of small tranches and for more tranches specialised by industry groups. Included in the portfolios of the 56 defunct finance companies are avals, letters of guarantee of term loans with avals -- Contingent Liabilities. These contingent liabilities are obligations of the failed finance companies to pay third party creditors in the event of a default on an obligation between the borrower and a third party creditor.

If the borrower defaults on his obligation to a third party creditor and the failed finance company pays the creditor under terms of the contingent liability, the failed finance firms hold a claim, equal to the amount paid under the contingent liability, against the borrower and against the collateral, mortgaged, pledged or otherwise offered to secure the contingent liability, if any. Unless the contingent liability is a default contingent liability, the failed finance firms continue to bear an obligation to pay claims in the event of a default by the borrower on its third party obligation. All or a portion of the collateral, if any, securing business loans contained in overlap loans also secure contingent liabilities with unfunded balances remaining outstanding.

Clarification of Policy Regarding Discussions Between Interested Parties and Borrowers Parties wishing to participate in the sales may enter into agreements with borrowers prior to the contract execution date, subject to certain restrictions, and may enter into agreements if the contract execution date does not include provisions for: (i) loan repurchase agreements before six months after the contract execution date; or (ii) principal payments on the business loan or unsolicited bid loan before six months after the contract execution date. However, the agreement may contain escrow account provided the funds in an escrow account are not released to make any principal payments before six months after the contract execution date and must include a provision prohibiting bidders or any other party from using the escrow accounts as a collateral for any loan facility or financing arrangement.

All agreements between borrowers and parties wishing to participate in the sales shall be delivered to the FRA for review. If the FRA determines that the agreements violate restrictions, the business loans or unsolicited bid loans of the borrower will be removed from the sale and the purchase price will be reduced by an amount determined by FRA. Any determinations regarding violations pursuant to the first paragraph of this sub-section and removal of loans will be made by the closing date. The determination of the purchase price adjustment will be made, and the amount remitted, within 60 days after the closing date. II. Addition and Removal of Business Loans and Unsolicited Bids As of Sept 30, the FRA added 55 business loans, with an aggregate outstanding principal balance of approximately Bt918.6 million to the business loan sale and removed 1,002 loans, with an aggregate outstanding balance of around Bt30.11 billion from the loan sale.

The FRA added no unsolicited bid loans to the bid sale and removed 67 loans with an aggregate outstanding principal balance of about Bt2.85 billion as of Sept 30 from the unsolicited bid sale. Additional Business Loans added to the Business Loan Sale The FRA added business loans to the business loan sale for the following reasons: (i) it identified additional defaulted contingent liabilities for inclusion in the business loan sale and (ii) loans which had not been classified as business loans by the FRA or the failed finance companies pending additional review were confirmed by the FRA or the failed finance companies as business loans and were added to the business loan sale.

Removal of Business Loans from the Loan Sale and Unsolicited Bids from the Unsolicited Bid Sale Business loans were removed from the business loan sale and unsolicited bid loans were removed from the unsolicited bid sale for the following reasons: (i) at the request of the Bank of Thailand, (ii) owing to the discovery of an associated contingent liability with shared collateral, (iii) litigation associated with the loans or associated with related loans, and (iv) repayment in full between July 31 and Sept 30.