The country's largest hot-rolled steelmaker, Sahaviriya Steel Industries Plc (SSI), may be able to move forward with its business rehabilitation plan this month if the Central Bankruptcy Court approves the plan.
The court is scheduled to make a ruling on Dec 15.
Hot-rolled coil production at the SSI plant in Prachuap Khiri Khan’s Bang Saphan district.
If the court agrees with SSI's rehabilitation plan, the steelmaker's three lenders -- Krungthai Bank (KTB), Siam Commercial Bank (SCB) and Tisco Bank -- can turn their defaulted loans into performing loans, said Parinya Patanaphakdee, senior executive vice-president and head of the credit restructuring and asset management group at KTB.
"If the court rules in favour of the plan, the local banking industry could see an 8% drop in bad loans," he said.
Loans worth 30 billion baht lent to SSI alone represent 8% of commercial lenders' non-performing loans (NPLs) of 390 billion. In terms of gross NPLs, they account for 2.8-2.9% of commercial banks' 13 trillion baht in outstanding loans.
SSI and its loss-making subsidiary, SSI UK, which operated a steel plant in Teesside, England, borrowed a combined 48.4 billion baht from the three lenders -- 22 billion each from KTB and SCB and 4.4 billion from Tisco Bank.
They defaulted in September last year.
The three major creditors have written off NPLs for SSI UK, but it is possible to realise some income from the deep-sea port owned by the now-defunct company if it can manage to divest itself of assets, Mr Parinya said, adding that some investors have paid interest to acquire the port.
SSI UK's liquidation is expected to be completed next year.
Mr Parinya said SSI's business operations have been improving in line with global steel prices and its balance sheet is swinging back to positive.
The company's capacity utilisation has improved to 1.3-1.4 million tonnes a year -- a level that exceeds the pre-crisis period for SSI UK in 2014-15.
Global demand for steel is higher than supply, and commodity prices have been picking up. The positive tidings are expected to continue next year.
Demand in the local market would also improve on the back of the government's big-ticket infrastructure investment plan. The positive factors would support SSI's business operations and financial results, Mr Parinya said.
Since the default, SSI has financed its own business operations. Its three major creditors have not committed to fresh fund injections, but they may consider supporting the company's additional liquidity as deemed appropriate.
"Practically, creditors are ready to inject additional liquidity to support the company's business rehabilitation plan and help customers return to normal," Mr Parinya said. "But we need to monitor its business operations for a while."
Apart from liquidation of SSI's UK assets, a debt-to-equity swap is one method under the business rehabilitation plan.
A source said last month that SSI, which is also a business rehabilitation planner, had proposed a debt restructuring plan to all 40 creditors. The source added that a majority voted in favour of the plan.
"There were four or five creditors that opposed the plan, but they were in the minority," the source said.
But the source said the plan would not be disclosed until after the court ruling on the restructuring plan.
SSI acquired 100% of the British steelmaker in 2010, with the ambitious goal of having its own furnace and steel complex in Britain. But the run-down facilities resulted in greater costs than expected for the parent firm.
The overhaul took longer than expected, putting off a resumption of operations. That, coupled with worse-than-expected global demand, took a toll on the company.
The liquidation of SSI UK was announced by SSI late last year, when the company submitted its debt rehabilitation plan to the Bankruptcy Court after a massive loan default. SSI UK then ceased operations.