Bullet train operator pitches restructuring idea to shareholders

Taipei, June 27 (CNA) The chairman of Taiwan High Speed Rail Corp. (THSRC) appealed to disgruntled shareholders for patience at the company's annual shareholders' meeting Friday and said he hoped to come up with a plan to rescue the financially troubled company soon. THSRC Chairman Tony Fan told shareholders that the company was weighed down by accumulated losses of NT$52.1 billion and liabilities of NT$457.4 billion as of the end of 2013, and that THSRC's financial situation needed to be restructured to turn the situation around.
The need for reform comes even as the company's daily operations seem to be improving, with ridership expected to exceed 50 million in 2014, after it grew 6.65 percent to 47.49 million in 2013. Higher ridership generated 6.24 percent growth in revenue to NT$36.1 billion last year and pre-tax net profit was NT$2.71 billion, but because of the high debt burden, the company said it would not distribute dividends again this year. Expressing their dissatisfaction, some small shareholders attending the meeting demanded that the high-speed rail company distribute free train tickets or discount tickets to them, arguing that they had not received a dividend for years. Fan empathized with their predicament, but said that unless the concession period to operate the rail line was extended, allowing THSRC to amortize its depreciation over a longer period of time, it would be hard to save the company. Fan, who was appointed THSRC chairman in March, said he was in discussions with the government to extend the concession period, and he hoped the company could come up with a financial retructuring plan by the end of August. He pledged to shareholders that he would suggest the concept of distributed preferential tickets in the plan, but he dismissed other suggestions that the government buy out the rail company to solve its debt problems. Fan told shareholders that such a move might not be completed in even 10 years time because the liquidation of the company's assets could not take place until lengthy court proceedings would be completed.
"If it came to that (a government takeover), I think it is hard to tell whether the result of the process would be favorable to small shareholders," Fan said.
"One question is whether the acquisition price would be in the best interests of shareholders. That's an unknown." Rather than having the government buy THSRC's assets, Fan said he would try to put the company on more solid footing by reducing THSRC's capital through the redemption of preferred stock to offset some of the accumulated losses and then raise new capital. THSRC has already been through one restructuring process, after the government took majority control of the company in 2009. The company was allowed to use a more forgiving formula to calculate depreciation and negotiated a refinancing deal with local banks to reduce its interest payments.
It raised fares amid fierce opposition in 2013 to boost revenues, but that still was not enough to compensate for its past losses. (By Wang Shu-fen, Evelyn Kao and Luke Sabatier)