# Restructuring Agency:

# Annex Table 10: Process of Asset Disposition

|**Country**<br>**Example**|**From Debt Restructuring to Asset Sale**|**Number, type and amount of**<br>**loans forced into bankruptcy,**<br>**restructured**|**Assets sold and assets that**<br>**remain on books of AMC (as %**<br>**of total)**|
|---|---|---|---|
|Finland<br>(91 - 94)|Was transfer a one-off process? Arsenal: Transfer of assets was a one time event<br>Criteria used for loan workout: Arsenal: Loan goes through valuation process as in any regular bank.<br>Viability is determined on a case by case basis. A client is considered to be viable if it can, through own<br>activities and with temporary support, develop a profitable operation.<br>Instruments applied (partial debt write off, debt-to-equity swap, change of maturity) Mostly used debt-to-<br>equity swaps for restructuring.<br>Process of asset sale/disposition: Arsenal used negotiated sales method.<br>Purchaser of assets: 100% domestic<br>Accumulated losses/profits:<br>**Arsenal:**Losses had reached over FIM 18 billion by the end of 1997, from original transfer of assets worth<br>39.5 billion. This figure includes the acquisition of STS Ltd.<br>STS: Before being acquired by the Arsenal Group, STS had incurred in losses of FIM 2.5 billion against<br>total (face) value of assets originally transferred of about FIM 3.4 billion.|.<br>Of an initial portfolio of FIM<br>11.4 billion corporate and<br>private clients in 1993, 69% had<br>been forced into bankruptcy by<br>June 1997<br>*****<br>31 % of initial portfolio had not<br>been forced into bankruptcy. Of<br>these 1.1 billion, or 9.8% of<br>initial portfolio were retumed to<br>regular banking system|.<br>Arsenal: Total RE portfolio<br>after write-downs was FIM 8.5<br>billion; by end 1997, Arsenal<br>had sold FIM 5.9 billion, or<br>78.4%.<br>*****<br>Market value of assets<br>transferred amounted to FIM 28<br>billion. At end 1997, FIM 13<br>billion remained in Arsenal's<br>portfolio, equivalent to 46.5<br>percent.|
|Ghana<br>(82 - 89)|Was transfer a one-off process? Yes<br>Criteria used for loan workout<br>*<br>Original idea was to restructure enterprises that were classified as viable. Criteria for loan work-out:<br>the default to the bank was not willful, capacity to revive and profitably operate (including managing)<br>the enterprise was assured, market prospects remained good, necessary working capital and other<br>required resources were available, conditions leading to the previous default or difficulties identified<br>and properly addressed and recovery prospects remained good.<br>.<br>The Government commissioned a study to assess the magnitude and nature of corporate distress and<br>recommend a project to facilitate the restructuring of potentially viable enterprises. The first phase of<br>the study which reviewed a sample of 214 firms concluded that a majority of them had good prospects<br>**for**viable onerations if they undergo financial, technical and managerial restructuring. The second<br>phase examined the altemative institutional anrangements for the restructuring and recommended the<br>establishment of an investment bank to carry it out. However, two new private merchant banks opened<br>in 1990 in addition to a previously existing Merchant Bank and thus the proposal was rejected.<br>In the end, enterprise restructuring became mired in political problems and assets were basically sold<br>off.<br>Instruments applied (partial debt write off, debt-to-equity swap, change of maturity)<br>Process of asset sale/disposition:<br>.<br>Negotiated sales. NPART advertised the assets subject to foreclosures in the local papers upon which<br>interested buyers approached NPART.<br>Purchaser of assets: Domestic investors mainly and some foreign investors purchased the assets of those<br>subject to foreclosures.|*****<br>Initially, the staff had to<br>determine the accuracy of the<br>loan records.<br>.<br>As of April 1993, the resolution<br>of loans of 203 enterprises with<br>debts of C38.45 billion (65% of<br>total NPART assets) was as<br>follows:<br>i.<br>foreclosures for 94 firms with<br>C14.5 billion (37.7%);<br>ii.<br>restructuring for 89 firms with<br>**_C_**2 9hillinn**(330):**<br>iii.<br>pay offs at full/discounted<br>value for 10 firms with C414<br>million;<br>iv.<br>write-offs for 3 firms with<br>Cl.45 billion; and<br>v.<br>other for 7 firms with C9.2<br>billion (23.9%).|.<br>By June 30, 1997 when it was<br>closed down, NPART had<br>recovered a total amount of<br>C19.61 billion or 32% of its<br>original portfolio of_C59_<br>billion.).<br>*<br>About C610 million were sold<br>outright with concurrence of the<br>debtor. (Equivalent to 1% of<br>the total portfolio of C59<br>billion.)|