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DERIVATIVES STRATEGY & TACTICS LOOKS AT SHOWA SHELL

 NEW YORK, Feb. 26 /PRNewswire/ -- The first in-depth look at Showa Shell Sekiyu KK's 125 billion yen hedging loss will be published on Monday in Derivatives Strategy & Tactics, a New York newsletter. Last week the Royal Dutch/Shell group affiliate attributed the 1.05 billion dollar hedging loss to the company's finance section, which bought a huge amount of dollar forward contracts in 1989 when the yen was at 145 and stubbornly held onto the position as the yen fell. The amount is equivalent to about three to four year's worth of pre-tax earnings for the company, and represents the biggest hedging loss ever reported according to Joe Kolman, editor of the newsletter.
 The newsletter quotes a former Showa Shell senior executive who says the firm had a rigid corporate hierarchy which allowed senior executives -- in this case a general manager -- to do virtually anything once he climbed to a certain level. "There were no check and balance functions in the company," the former official said. Another Japanese source quoted in the story said that he could confirm the company sustained losses of "hundreds of millions of dollars" trading NYMEX energy contracts in the late 1980's.
 Instead of closing out its forward contracts, Showa Shell used a technique called a "historical rate-rollover," which allowed the company to keep rolling over its losses into the future with new credit from its bankers. Once a fairly common technique, it has come to be looked upon as a disreputable practice, largely because of the opportunities for abuse.
 According to the newsletter, one Japanese expert estimates there may be 20 -30 trillion yen (about $150 billion) in undeclared currency losses on the books of Japanese companies today.
 For more information about receiving a copy of the newsletter, send a fax to Derivatives Strategy & Tactics at 212-366-0551.
 -0- 2/26/93
 /CONTACT: Derivatives Strategy & Tactics, 212-366-0551/


CO: Derivatives Strategy & Tactics ST: New York IN: PUB SU:

TM -- NY002 -- 0730 02/26/93 09:00 EST
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Publication:PR Newswire
Date:Feb 26, 1993
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