Embattled Picnic Corp Plc has reached an agreement with a major creditor to avoid imminent legal action, it has agreed to pay accrued interest to the holder of a bill of exchange worth Bt283.79 million, on payment of which Picnic has defaulted.

Picnic told the Stock Exchange of Thailand (SET) yesterday that the creditor, an asset management company, had agreed not to file a lawsuit against it until June 30.

"The money for the interest payment will come from the company's working capital," Picnic said.

Legal action has also been taken against Picnic by three asset management companies holding Bt226.21 million in bills of exchange, on which the cooking-gas manufacturer defaulted last year.

The SET has warned investors that Picnic faces a "highly improbable" task in succeeding with a fund-raising plan because its offering price for new shares is far above the current market price.

Moreover, if the company fails to raise funds from its proposed issue of 1.48 billion capital-increase shares, it may slide into bankruptcy because it has no money to settle the defaulted bills of exchange.

The collapse of a shareholders meeting earlier this month because of failure to make a quorum was another sign highlighting the problems facing Picnic's fund-mobilisation plan.

Typically, listed companies do not have quorum problems because their shareholders always attend meetings. But Picnic's minor shareholders have likely observed that the company's major shareholders may already have divested themselves of Picnic shares.

Picnic is trying to sell 1.48 billion shares to existing shareholders at a ratio of one new share for every two held shares at a price of Bt1 each.

Meanwhile, Power-P Plc has clarified several points in its 2005 financial statement, as required by the SET. Power-P set aside Bt82.5 million for allowances in the final quarter last year, comprising Bt52.8 million to increase its loan exposure to Union Infratech, including interest receivables, and Bt29.7 million for an advance payment to P Prize Supplies and Construction.

The allowance led the company to record a loss of Bt50 million in the fourth quarter last year.

"The management had no intention to set aside an allowance for doubtful accounts. Management understood the problems of the debtor and were confident that the debt would eventually be settled," the company explained. "Nevertheless, the auditor's report was prepared on a strict and cautious basis. The allowance for doubtful accounts in full was thus suggested.

"For item 1, the adjustment was recommended because there remained a balance in the account receivables that was more than one year overdue. As for item 2, it was viewed that there was a risk of non-payment by the contract party."

P Prize Supply and Construction is an independent construction contractor. It is related to Power-P as a sub-contractor of the Bt500 million Mongkol Harbour Gas Tank project and the Bt89 million World Gas Tank-Bang Pakong project in Chonburi Province. The first project was cancelled when it was only 4.5 per cent complete and the second is currently 90 per cent complete.

Union Infratech Co Ltd is an independent contractor engaged in public sector works. It is related to Power-P as a partner and sub-contractor in Joint Venture UBC Power.