Big creditors happy with SSI
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Though Sahaviriya Steel Industries (SSI) is facing tight liquidity following production delays at its subsidiary Sahaviriya Steel Industries UK (SSI UK), its major lenders say they're confident in the company's debt coverage ability, indicating they hav
SSI earlier reported to the Stock Exchange of Thailand that it had signed a standstill agreement to forbear certain rights demands for immediate payment of short term loan repayment to September 30 this year.
The company received waivers from three banks – Siam Commercial Bank, Krung Thai Bank and Tisco Bank – providing long term credit facilities including partial deferrals of certain scheduled repayments due in 2012.
The three banks last year financed long-term loan and working capital of US$600 million (Bt18 billion) to SSI UK.
They still support the financial loan to SSI and have not called the debt back. Other short-term lenders have denied waiving the technical default, which is creating concern among investors and analysts.
Price cycle
Arthid Nanthawithaya, senior executive vice president, SCB, said yesterday it is a typical price cycle in steel, in which the prices have both risen and fallen in line with the global market. However, the steel industry has an important role in the country’s development and the bank believes SSI can survive hard times. SSI shareholders, meanwhile, have greater capital and assets, which are sufficient to inject money into improving SSI’s liquidity.
SSI recently injected equity of Bt1.65 billion into SSI UK to strengthen its subsidiary.
Arthid said the credit line to SSI UK is a limited one, therefore, the bank would not set special loan loss provisions.
Kannikar Chalitaporn, president of SCB, added that the bank has a coverage ratio 130 per cent higher than the central bank requirement. The ratio is sufficient to defray bad debt.
The bank set a loan loss provision of Bt1.5 billion to Bt2 billion per quarter.
She said the bank was not concerned about SSI because the steel industry is a core commodity. SCB has changed its strategy of lending from wholesale banking to financial advisory, focusing on lending to SMEs and retail customers.
SMEs and retail loans were key drivers of SCB in the first five months – with a 20-per-cent loan growth compared to 16 per cent in the banking industry.
