Canadoil's founders Sozzi files enough claims to potentially overwhelm all other creditors; receiver to disclose today who will be planner by Chaim Estulin

Canadoil's founder files enough claims to potentially overwhelm all other creditors; receiver to disclose today who will be planner

The official receiver of Canadoil Group’s former two main entities in Thailand is set to disclose today whether about USD 1.5bn claims from parties related to founder Giacomo Sozzi are valid, a determination that could give him control over the process, said four sources familiar with the situation. In total, about USD 2.5bn of claims were filed last month against specialty-pipe maker Canadoil’s two main Thai OpCos, Canadoil Pipe (CPIPE) andCanadoil Asia (CASIA), as part of their court-overseen restructuring process, the four sources said. Along with filing their claims, creditors voted on one of two candidates to be the two entities’ planner -- as the administrator is called in Thailand -- they said. The receiver’s decision on the claims will go a long way in determining whether the planner is Sozzi’s nominee or a rival proposed by a group of holders of a USD 150m Credit Suisse-arranged private placement facility, who late last year seized control over the two OpCos, said the four sources familiar and a fifth source familiar. While any plan would ultimately need to be approved by a majority by value of the creditors, the planner can direct the process in a way that favors one side or the other, said three of the sources familiar. A gaggle of banks with domestic loans could be a wildcard, said the first three sources familiar and the fifth source familiar. Before the voting process began, the banks met to try to coalesce around a single candidate, but failed to confirm a united choice because the decision rested with higher ups, said the fifth source familiar. The decision was probably complicated by Sozzi having a relationship with some of the bankers but not necessarily with the higher ups, said one of the three sources familiar and the fifth source familiar. Following the determination of the claims and the winning planner, the receiver has a week to present the results to a court for approval, after which the winner has five months to prepare a plan, said the second source familiar. At numerous stages, creditors can file objections, including against rival claims, significantly delaying the process, said the first three sources familiar. “By [tomorrow’s meeting], the mud will not be as thick,” said the second source familiar. “I’m not sure you will have clarity.” Sozzi, an Italian-Canadian, did not respond for comment. Making it count Some of the largest claims filed were from numerous entities related to Sozzi, including one seeking the total equivalent of USD 769m in compensation for CPIPE's and CASIA's use of the Canadoil name, said the first two sources familiar. Against CPIPE --- producer of pipes with a diameter of 4”-100” and corrosion-resistant alloy clad pipes -- there were a total THB 58bn (USD 1.79bn) in claims, said the first and fourth sources familiar. Of that, about THB 18bn (USD 556m) was for use of the Canadoil name, said the first two sources familiar. Another about THB 18bn was for the termination of an exclusive distribution agreement with Dubai-based Canadoil Group FZCO, said the first source familiar. FZCO is listed as a sales office on Canadoil Group’s website, which also still counts CPIPE and CASIA as manufacturing facilities. The largest bank creditors to CPIPE are Siam Commercial Bank, with THB 5.2bn (USD 160m) of claims, and Standard Chartered Bank’s Thailand arm, with THB 1.4bn (USD 43m), the first source familiar said. There was a total of about THB 23bn (USD 710m) claimed against butt-weld fittings maker CASIA, according to the first and fourth sources familiar. Of that THB 6.9bn (USD 213m) was for the name and THB 2.9bn (USD 89m) was for the breach of FZCO's exclusive distribution rights, said the first source familiar. The largest other claim against CASIA was for THB 8.9bn (USD 275m) from domestic lender Thai Military Bank, he said. Each member of the Credit Suisse group filed their full share of a total THB 4.6bn (USD 142m) in claims independently against both entities, said the first source familiar. As reported, the Credit Suisse group’s claims against the CPIPE and CASIA are based on guarantees the two entities provided to back the USD 150m loan to their offshore parent. Credit Suisse itself also filed about THB 2bn (USD 62m) claims against CASIA related to a bilateral loan, said the first source familiar. As reported, Sozzi wants a member of Thai workout firm Treasury Specialty appointed as planner while the Credit Suisse-group-controlled OpCos have nominated George Kelakos, an American bankruptcy attorney who is currently the sole director of the two OpCos, as reported. As effective indirect shareholders of the two OpCos, the Credit Suisse group has a much stronger voice than other creditors in choosing the planner, as reported. Under Thailand's bankruptcy law, the group would only need the support of 33% of the creditors by value for its nominee to win, while Treasury Specialty would need more than two thirds. While Thailand's rules give the Credit Suisse group the upper hand in choosing the planner, ultimately, any restructuring proposal he comes up with would need to be approved by at least 75% by value of one creditor class, and then a majority of all classes, said the second source familiar. Taking turns At least for now, the Credit Suisse group has managed to turn the tables on Sozzi. As reported, while he still controlled CPIPE and CASIA, Sozzi tried in early 2012 to have a court put the two entities into the rehabilitation process, for which he nominated himself as the planner. Concerned the skewed voting process might allow him to win the nomination, bank creditors and the Credit Suisse group variously objected to Sozzi’s plea for rehabilitation and after a yearlong battle, the court threw out his case. In January this year, a court finally agreed to put CPIPE and CASIA into rehabilitation, in response to new petitions filed by Sozzi late last year, before he was deposed, as reported. A company in Thailand can only be put into rehabilitation if it is deemed insolvent, a status the court overseeing the 2012 cases ruled did not apply to the two OpCos at that time. As reported, the company fell into default shortly after drawing down USD 150m of the Credit Suisse-arranged USD 250m facility in early 2011. In early 2012, the creditors of the facility put the ultimate holdco, Luxemburg-registered Finspace S.A., into receivership, and took control over intermediate holdco, Spain-registeredGlobalspace Energy Investments S.A., which was the borrower. Finspace, CPIPE and CASIA provided guarantees. As reported, by taking control over Globalspace, the Credit Suisse group -- after facing numerous regulatory hurdles -- were finally able late last year to drill down and appoint their own director in Thailand over CPIPE and CASIA and then install their own management team. The two entities are being run by Teak Capital Corp’s Lampros Vassiliou, a former lawyer and long-time Asia restructuring specialist, who had been circling the company since it defaulted in mid-2011. The Credit Suisse transaction was at least the fifth private-placement financing raised by Canadoil in as many years to build up its operations in Thailand. While the family-owned Canadoil has had decades of pipe-making experience in Italy and Canada, it only commenced production in lower-cost Thailand in 2007 -- initially funded largely with a USD 82m private loan anchored by a Citadel Investment Group fund, as reported. Already by December 2009, it was bringing onstream its third pipe production line in the Southeast Asian country, raising per annum capacity by 200k tons, to 850k tons, according to the teaser for the Credit Suisse loan, as reported.  by Chaim Estulin