Local, foreign creditors back govt's move to put THAI under bankruptcy protection
Creditors are supporting the government's move to have Thai Airways International (THAI) seek bankruptcy protection, while the Finance Ministry is preparing to negotiate the sale of 3 per cent of its stake in the airline, which will make the national carrier lose its state enterprise status.
An informed source in the financial sector said on Wednesday (May 20) that THAI’s domestic and foreign creditors have signalled that they want the airline to seek bankruptcy protection. The creditors also have appointed lawyers to negotiate the repayment of debt, while the Transport Ministry has been assigned by the Cabinet to file for the airline’s rehabilitation with the Bankruptcy Court.
According to THAI’s 2019 financial statement, its debt obligations stand at Bt147.4 billion.
The debt comprises Bt46.5 billion incurred from the leasing of planes with 32 planes used as collaterals for loans from foreign banks, including banks in France and Japan. Another chunk of the debt is Bt74.1 billion in loans, of which Bt2 billion is owed to Krung Thai Bank, Government Savings Bank, and CIMB Thai, Bt8.9 billion taken in long-term loans from banks in Germany and the United states, and a short-term debt worth Bt3.5 billion. The airline also owes a Bt11.9-billion foreign currency denominated debt to the Finance Ministry and Bt437 million owed to the Export-Import Bank of Thailand.
“If the rehab process moves fast and some businesses can be split apart, then THAI could recover within a year,” the source said, though he conceded that if the Finance Ministry cuts its holding to below 50 per cent, then THAI will find it tough to raise funds in the future.
Finance Ministry officials are scheduled to meet with representatives of Vayupak Fund today (May 21) to discuss the option of selling off shares after the Cabinet approved the ministry’s proposal to reduce its holding to 48 per cent. The ministry plans to sell 3.17 per cent of its shareholding to the fund.
Initially the two sides agreed to price the shares at a seven-day average and a 15 to 20 per cent discount. The ministry is expected to get approximately Bt600 million to Bt700 million from the transaction.
Finance Minister Uttama Savanayana has said that the sale of shares should be completed within next week.
THAI’s share price has risen sharply over the past two months, closing at Bt5.4 on Wednesday – up almost 15 per cent from the previous day and touching the upper ceiling for the eight time in two months.
Meanwhile, Tisco Security has warned that investing in the airline may be too high a risk, citing the fact that few companies have had success in rehab. Since the 1997 financial crisis, 52 firms filed for bankruptcy protection, and 20 or 38 per cent have failed and been removed from the stock market. Nine firms are still under rehabilitation and trading in their shares has been suspended, while 23 firms, representing 44 per cent, have been successfully rehabilitated and have returned to normal trading.
Rehabilitation on average takes seven years, a Tisco analyst said.
The Transport Ministry is expected to file for bankruptcy protection on THAI’s behalf in mid-June with Thai and US courts. Transport officials and THAI’s management team will submit a list comprising 30 names for the rehab management team to Prime Minister Prayut Chan-o-cha on May 25 for consideration.