DBS Thai Danu Bank Sells 77 % Of Non-Performing Loans (NPLs)

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Bt 30.6 Billion of NPLs Sold To
Two Successful Bidders

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Non-Performing Loans Ratio Falls to 10%

BANGKOK, [27 July 2000] - DBS Thai Danu Bank (DTDB) said today it has entered into agreements to sell up to Bt 30.6 billion, or 77% of its Non-Performing Loans (NPLs) for an aggregate price of Bt 8.4 billion. The sale price represents 29% of the NPLs' Unpaid Principal Balance.

The sale, which includes both corporate and retail loans, was conducted through a competitive private auction. The winning bidders were National Finance Public Company Limited, a local Thai finance house, and Global Thai Property Fund, an affiliate of Lehman Brothers, a U.S. investment bank. Both buyers have established and extensive distressed debt capabilities in Thailand.

At June 30, 2000, DTDB reported total NPLs of Bt. 32.7 billion, or about 34 % of total loans on the Bank of Thailand's benchmark account basis. On a post-sale Pro Forma basis, the bank will have reduced its NPLs to approximately Bt 6 billion of NPLs and its NPL ratio will fall to approximately 10% on a smaller loan base.

In June, DTDB successfully completed its Bt13.5 billion capital increase designed to allow it to aggressively deal with its NPLs, including sale to third parties, as well as to position itself for future growth. DTDB said it had invited a number of parties to review its NPL portfolio and submit bids in June. As a result of those bids, DTDB selected the winning bidders and concluded definitive sales and purchase agreements with them. The sale is expected to close over the next two months.

As a consequence of the sale, DTDB expects to recognize a loss of Bt11.6 billion, resulting in a Tier 1 capital adequacy ratio (CAR) of 11%, and Total CAR of 16%, one of the highest among Thai banks.

DTDB officials said the Bank had been proactively restructuring and managing its NPLs over the past two years, concentrating on higher quality loans and those with the best recovery potential. To date, some Bt44 billion in loans have been restructured.

The NPLs sold today represent those loans requiring longer recovery time and proportionately more significant staff resources than DTDB was prepared to continue to expend.

Pornsanong Tuchinda, President of DTDB, said, "We are pleased with the process and outcome of the NPL sale. We have removed a significant portion of our impaired assets, improved our balance sheet, and at the same time strengthened our capital base following the rights offering. We have said we were willing to deal boldly with our problems, and we have.

"We have recently embarked on three additional initiatives to build sustainable revenues and drive improved performance. We have formed a separate Enterprise Banking Group to enhance focus on small and medium sized businesses. We are transforming our branches into more effective sales and distribution channels. And we have launched a Transformation Team to spearhead changes in work practices.

"We are now entirely focused on getting back to business, and building our banking franchise in Thailand, Pornsanong said.