Thanachart Bank downgrades loan to SSI
Thanachart Bank has downgraded its working capital loan to Sahaviriya Steel Industries to non-performing after declining SSI's request to change the loan's status to long term as part of the steelmaker's attempt to pay down short-term debt.
Anuwat Luengtaweekul, executive vice president, said recently that the bank had to set aside Bt300 million in the third quarter as a 100-per-cent provision against the SSI loan. While this case is still under legal process, he believes that both sides could find a solution soon.
Even though SSI has become a non-performing customer, the loan loss provision of Bt300 million would not hurt the bank’s performance, he said.
SSI, the country’s biggest steel producer, reported to the Stock Exchange of Thailand last week that the company and a group of banks providing short-term working capital loans had entered into a standstill agreement on May 14.
Later on August 14, SSI and the short-term lenders, together with a group of banks providing long-term credit facilities, signed a memorandum of understanding for financial backing, agreeing to terminate the standstill agreement, it said.
The short-term lenders agreed to |change the status of the loans from working capital loans to three-year amortising loans to be consistent with the economic situation, industry and business operation of SSI.
The course of action regarding the |MoU and the negotiations among SSI, the short-term lenders and the long-term lenders has been progressing and SSI expects that an agreement will be reached by next month.
However, SSI and two disagreeing short-term lenders, which it did not name, have not concluded on the agreement, even though the company has been trying to clarify and negotiate, multilaterally with the other lending financial institutions included, to maintain the working capital credit lines and extend the repayment dates for short-term loans coming due. Other lending financial institutions agreed to sign the standstill agreement and the MoU, except the two lenders disagreeing with SSI’s proposal.
Both disagreeing lenders submitted petitions to the court to force the company to immediately repay the loans including interest – a combined Bt1.25 billion debt. The company will exercise its right to negotiate with these two disagreeing short-term lenders.
Thanachart Bank admitted to The Nation that it is one of the two lenders that filed petitions with the court.
SSI borrowed working capital loans from a group of local banks – Siam Commercial Bank, Krungthai Bank, Tisco Bank and Thanachart Bank – to support its operations in Thailand and the UK. Last year, SSI acquired Sahaviriya Steel Industry UK, a fully integrated iron-steel mill in the northeast of the UK.
SSI ran into financial problems because SSI UK delayed its production start-up and the global economic slump weighed on the steel industry. SSI UK finally resumed production in April.
Vorapak Tanyawong, president of Krungthai Bank, said the bank agreed to transform SSI’s working capital loan to a long-term loan, as the company might need more time to improve its performance as its key problem is the UK plant. However, the resumption of operations at SSI UK is expected to help SSI turn around.
The government next year has many projects that will boost demand for steel, and this could help SSI, he added.
