Government contract to build housing

[thaibites0]

My step-son has brought a guy to see me asking for some help to secure a government contract to build housing for the better off Thai's and here's the proposal-

My Thai is pretty good and I could follow everything he said and I know he has built roads and buildings for the government before so his plan has a lot going for it but - there is a contract going out to build 5000 upper class housing units in BKK that will lead to 50,000 nationwide when done but he needs the venture capital to do it.

What he wants is 3m to get the siggie from the government and once that's in place he needs 60m in a letter of credit that the government will accept to get an advance on the building costs that will put 225m back in the bank to start the work. Looking at 5000 units at 300,000 a time with about 40,000 profit on each even after the bite from the powers that be.

The guy has a registered company and he knows the government official that will sign (and pocket the extra) the contract and the payments afterwards.

I've known the guy since he was a kid and seen his company grow but this is a huge step for him and he's asking me for help to do it - 3m is not a problem but 60m?

He says it's all letters of credit except the first 3m but where would you get the 60m?

Before the pooh poohers get in (and I value that input anyway!) this guy really does have a company doing government contracts throughout the region and really does know the senior government official that will sign the contract.

Any ideas?

[britmaveric]

Hmmm seems you need collateral or partnership in his company.

[Firefan]

Leaving out the obvious warnings, nobody here can give you much advise.

Only thing I can think of is that guarentees/collateral would be needed from his company, and that you naturally should perform an extensive due dilligence process on the whole venture.

The above process would involve both lawyers, bankers and accountants.

Good luck - sounds like an interesting challenge.

Cheers!

[meom]

... needs 60m in a letter of credit that the government will accept to get an advance on the building costs that will put 225m back in the bank to start the work.

He says it's all letters of credit except the first 3m but where would you get the 60m?

Any ideas?

If the above is correct and he has a good relation with his suppliers I suppose he could get the 60m through his suppliers.

[thaibites0]

He would probably get 1m in credit fron his suppliers but this really is the next level up - a joint venture with a falang company?

The paperwoks there and the government siggie is on hand - what's the next step?

[thedude]

i've seen similar cases. the LC should be negotiable. practically everything is. you get get it reduced but probably will need to find a larger contractor to back him with a share of the profits thrown in. effectively he is the sub-con but does all the work, the large contractor gets a margin which is effectively a spread over the funding cost. also, make sure the specs for the homes are tied down. with cement and steel prices fluctuating, you don't want to be caught on the wrong end of a forward contract. good luck.

[GuestHouse]

What he wants is 3m

Tell him to go fish in the nearest Klong...... 3m...... LOL.

There was a time when if a Thai swindled a foreigner for Bht50 he was happy.

[Eric Davis]

Run a mile!!!

[Digger]

If you think this is a serious proposition, I would suggest you make an appointment to go and see one of the partners at Deacons lawyers in BKK. One of the partners ( I forget his name, but its something like Khun Prabas) is pretty well connected - he will tell you if its a scam, but also if he acts for you, he will ensure you dont get diddled. This firm is not cheap - they are one of the top law firms in Thailand and charge accordingly.

Having said that to me at least I cannot see the Govt awarding any contract at the moment for 5,000 houses in the upper class Thai bracket. They are having enough trouble getting the low cost stuff off the ground.

[Khun Larry]

Any ideas?

<{POST_SNAPBACK}>

Sorry dude. No Thai can be trusted when you are talking that kind of money.

Forget it.

el scamo grande

[Thaipwriter]

Any ideas?

go and collect your brain from Don Muang, you must of left it there when you arrived.

[taxin]

Any ideas?

<{POST_SNAPBACK}>

go and collect your brain from Don Muang, you must of left it there when you arrived.

<{POST_SNAPBACK}>

Me thinks its a troll !

[Mr. Farang]

Based on what you have said, I suggest you tell him that "you don't have the money available" because it is "tied up" in other non-liquid assets, and wish him the very best of luck in his venture.

[pedro01]

this guy really does have a company doing government contracts throughout the region and really does know the senior government official that will sign the contract.

<{POST_SNAPBACK}>

If he really has such a business - why doesn't he have $75K stashed away ? It's hardly a huge sum compared to the amounts spent building roads...

Perhaps he's fallen on tough times...

Anyway - get him in front of your lawyer - get a contract. If he tells you that a contract is impossible because it's "under the table" money - walk away. Perhaps you can lend him 3million & accept the deeds to his house as collateral...

[thaibites0]

Hi pedro,

He does have $75k and as I said before that would not be the problem - the B60m letter of credit is the problem because his company has a registered capital of B1.5m and the mainstream banks are not interested.

Not looking for you guys (or me) to put your hands in your pockets and come up with B60m but more for an idea of how the big players would get this - Ital-Thai is another potential contractor for this and I'm sure they would have no problem but where do you start looking for this?

The guy is not trying to rip me off because I've offered nothing accept help to see if it's possible and I've known his family for over 20 years so my brain did leave the airport with me when I landed!

All the slush fund will come out of the B225m advance and the B3m cash and B60m are purely to prove capability but as I said it's outside my experience and was just looking for pointers.

[meom]

He does have $75k and as I said before that would not be the problem - the B60m letter of credit is the problem because his company has a registered capital of B1.5m and the mainstream banks are not interested.

In itself the registered capital of B1.5m doesn't really mean too much. The banks will be more interested in the (financial) size of similar projects that the company has succesfull completed in the past.

As you said there will be other (bigger?) bidders as well for whom the letter of credit will be no problem. Since your friend apparently has the concerned government official in his pocket he could be in a good position to team-up with another company such as Ital-Thai provided that the bigger company will not try to offer a bigger bribe to the concerned government official.