Economic Mid-Year 2001

Some headway but
a long way to go

Kochakorn Boonlai

DEBT

While the Thai Asset Management Corp soaks up large debts, banks and the authorities have turned their attention to small and medium-sized cases, with efforts made to encourage negotiations or resolve matters in court

Corporate debt restructuring slowed overall in value in the first half of the year, as banks and authorities increasingly turned their focus to dealing with small and medium-sized cases, either at the negotiating table or through the courts.

At the same time, policymakers focused on the launch of the Thai Asset Management Corp, a state -agency with special legal powers to restructure 1.3 trillion baht in bad Ioans to be transferred from state and private banks by the end of the year.

As of May, some 2.62 trillion baht in debt owed by 14,916 borrowers had entered restructuring talks since the Corporate Debt Restructuring Advisory Committee was established in mid-1998.

Major creditors represent 2.31 trilIion baht of the debt, owed by 2,858 borrowers.

The committee (CDRAC) was established by the Bank of Thailand to help co-ordinate debt restructuring talks between creditors and borrowers. Participants agree to abide by certain practices and deadlines. As of May, around 1.25 trillion baht in debt, involving 8,478 borrowers, had been restructured.

Restructuring outside of the CDRAC framework has shown similar progress. As of April, some 2.44 trilIion baht had entered restructuring, involving 462,931 borrowers. Suc cessful resolutions were reported fo 286,322 borrowers, involving debt o 2.13 trillion baht.

The results have helped push non-performing loans in the banking sector as of April down to around 795 billion baht, or 19.4% of total outstanding loans, compared with peak of 2.7 trillion baht, or 47% o total loans, in May 1999.

Other progress was made in tht bankruptcy courts. From January to May, 41 petitions were lodged with the Central Bankruptcy Court to enter business rehabilitation and have their plans accepted, involving total outstanding debts of 433.6 billion baht.

This compares with 31 case approved by the court last year although cases in 2000 involved a higher debt value. Figures last year included the case of Thai Petro Chemical Industry, alone responsible for some 270 billion baht in debt.

Listed companies entering business rehabilitation under the bankruptcy court in the first half included Siam Syntec Construction, the Suntech Group, Thai Electronic Industry and TPI Polene.

Prominent non-listed firms entering rehabilitation in the first half included Unicord Plc, Sarin Property the STA Group, Thonburi Automotive Assembly Plant and property developer Sathorn Thani.

By debt value, the biggest case submitted to the court in the first half oi the year was Sarin Property, with debt of 100.37 billion baht, followed by Thonburi Automotive at 63.6 billion and Unicord at 30.6 billion.

At the same time, the Central Bankruptcy Court in the first half cancelled rehabilitation orders or applications for 11 cases, compared with just three similar orders last year.

Premier Enterprise was the first case this year, despite the fact that creditors had voted in favour accepted its rehabilitation plan. Several other cases which exited the rehabilitation process, largely due to creditors rejecting restructuring plans, included Ban Chang Group, Thai Melon Polyester and Country (Thailand) Plc.

Most experts expect that debt restructuring, whether through the CDRAC or the bankruptcy court, will slow in the second half of the year as attention turns to the new stateowned Thai Asset Management Corp.

Only cases classified as non-performing loans as of Dec 31, 2000 ( will qualify for entry to the TAMI Borrowers from private banks must have outstanding loans worth a minimum of five million baht, two more creditors and have collateral pledged against the debt.

The large majority of cases going the TAMC represent borrowers fro state-owned banks such as Kru Thai Bank, Bangkok Metropolitan Bank and Siam City Bank. One k reason for the TAMC programme an expectation of improved efficiency in restructuring debt under a separate specialised agency. Slow
restructuring at the banks due is blamed to state enterprise regulations and state inefficiency.

Even so, legal experts and bankers say a considerable load of cast awaits restructuring. According to the central bank, new and re-entry non-performing loans combined have generally averaged 30 billion to 40 billion baht a month.