Although the domestic debenture market is projected to see inflows in the second half, there are concerns over a possible default and heavy sell-off of debentures issued by financially beleaguered Thai Airways International Plc (THAI) because of uncertainty over its rehabilitation plan.
THAI's debenture rollover is the main concern because many creditors of these corporate bonds are savings cooperatives, said Chatchai Sarit-apirak, chief investment officer of Kasikorn Asset Management.
Failure to roll over or a default on an interest payment could be a catalyst for panic sales that would result in a liquidity crunch, similar to the TMBAM Eastspring debacle in which the firm had to close four fixed-income funds because of massive redemptions as confidence was eroded by the coronavirus crisis, Mr Chatchai said.
"But we hope there will be a positive solution for THAI and that will not have a lot of impact on market sentiment," he said.
THAI has debentures worth 6.5 billion baht that will mature this year, with total outstanding debentures worth 70.1 billion baht that will gradually mature over the next 15 years, according to data from the Thai Bond Market Association.
The first tranche of debentures valued at 1 billion baht will mature on June 23.
There are 74 savings cooperatives of state-owned enterprises, universities, corporations and hospitals invested in debentures issued by THAI worth a combined 36.5 billion baht, Siam Post reported.
For instance, a savings cooperative of the Electricity Generating Authority of Thailand has invested a sum of 8.3 billion baht in THAI debentures, while the tally is 2 billion baht for savings cooperatives of PTT Plc and 727 million baht for employees at the Bank of Thailand.
The outcome of Thailand's financially beleaguered flag carrier is set to be unveiled by the end of this month. Transport Minister Saksayam Chidchob said THAI must submit a rehabilitation plan by the end of May if it wants the government to consider a rescue package.
THAI plans to seek short-term loans of 54 billion baht to finance operating expenses as it undertakes a rehabilitation plan.
But the amount is not the full bailout sum, as a further 80-billion-baht capital increase is needed for the rescue plan.
For Thailand's bond market, there was a net purchase of 7.2 billion baht in corporate bonds during the May 1-15 period, the first occurrence of net buying after the market experienced continuous sell-offs during the first four months, Mr Chatchai said.
"It is a good sign that funds have started to return to invest in corporate bonds again this month," he said. "It is anticipated that more inflows will be seen in the second half if there is no default and the outbreak subsides."
