Default on debt payment low in Thailand
Since the beginning of 2023, 62 companies around the world have defaulted on their debt payments, according to credit rating firm Moody's.
Of these, 41 are from the US and Canada, and the remainder are divided amongst Europe (11 companies), Latin America (7), and Asia-Pacific (2).
Moody’s report states that 33 of the total 62 companies defaulted on their debt payments in the first quarter of this year, marking the highest level since 2020, when there were 47 companies with debt defaults. In May, nearly half of the companies, specifically 15 companies, defaulted, the highest monthly figure since December 2020.
The companies that defaulted on their debt payments include Silicon Valley Bank, which ceased operations in March, as well as SVB Financial Group and Signature Bank.
The debt defaults of the two issuers last month created a ripple effect among investors and customers of banks in the US, affecting confidence in the global banking sector. By contrast, May’s defaults were mostly non-financial.
Rising interest rates have exacerbated the default situation.
Moody's forecasts that debt defaults may increase by 4.6% this year, especially in high-risk sectors, due to the central banks in many countries maintaining high-interest rates for an extended period.
The most concerning sector is commercial real estate, as the value of office buildings in the US and many other countries has significantly declined over the past year due to remote work trends and country-specific factors. Analysts are worried that real estate developers may lack the ability to repay their remaining debts, leading to losses for commercial banks and potentially triggering a "domino effect" in various sectors.
Debt default situation in Thailand
There are two companies with credit rating authority in Thailand, namely TRIS Rating and Fitch Ratings,
According to the Thai Bond Market Association, three companies have defaulted on the payment of interest and principal on the debentures this year, namely ALL Inspire Development, Chawee and Stark Corporation.
Fitch Ratings (Thailand) has been monitoring the situation of debt default in Thailand since 2022 amid the global trend of increasing defaults.
However, Thailand has strong liquidity and a steady recovering economy, which place less pressure on the Bank of Thailand to raise interest rates compared to many countries with strong economic growth, noted Lertchai Kochareonrattanakul, director of Corporate Credit Ratings at Fitch.
Moreover, last year, the Thai government tried to curb energy costs, leading to lower inflation rates compared to many countries. This has contributed to relatively low interest rates in Thailand, even among emerging market economies. This means that refinancing in Thailand is less of a problem relative to many other countries, especially for large to medium-sized companies under the supervision of Fitch Ratings.
The current situation in Thailand is less concerning than during the Covid period, as during that time, demand in all sectors was at a much lower level, and liquidity was much lower than it is now.
