Court to consider THAI filing
published : 26 May 2020 at 15:48
updated: 26 May 2020 at 21:02
The Central Bankruptcy Court has accepted for consideration Thai Airways International Plc's rehabilitation filing.
After checking related documents, the court will decide whether to take the case on Wednesday. If it does, THAI will get an automatic stay, a legal constraint that prevents creditors from attempting to collect debts while the case is open. It also remains a going concern which can operate its businesses normally while being restructured.
The news came after the market closed on Tuesday when THAI shares jumped 12.9% to 4.90 baht in trade worth 185.3 million baht.
Thai media reported the airline's foreign creditors had sent several representatives to monitor the situation.
The filing came after the cabinet's resolution on May 19 that the debt-stricken airline should undergo restructuring under the supervision of the court so that it could stay in business.
THAI is expected to also file for protection under Chapter 11 in the United States, or its assets including offices and planes abroad could be impounded. Of all its debts, 49% are owed to foreign creditors, led by those in the US, England and Germany.
The next step of the rehabilitation is to appoint a planner. THAI may propose one but its candidate must be approved by more than half of its creditors. If the creditors want to propose their planner, a vote of two-thirds is required.
After the creditors agree on a planner, the court will consider approving it. Once endorsed, the planner will have three months to complete drafting the rehabilitation plan, which will outline measures such as capital increase, capital deduction, new investors, new borrowings, debt repayments and/or haircuts and debt-to-equity swaps.
After the plan is done, it will be put to a vote by the creditors. If approved, the plan will be sent for approval by the court, who may say no if it finds the plan favours certain groups of the creditors over the others. The court will then appoint a plan administrator to execute it.
The process repeats until the court approves the plan but if no agreement is reached, the company will enter the bankruptcy process and its assets liquidated.
Last week, the Finance Ministry reduced its stake in the carrier to 48% from 51%, effectively stripping it of its state-enterprise status. However, the ministry’s two publicly traded Vayupak mutual funds remain the second and third largest shareholders with a combined 15% while the Government Savings Bank owns another 2%.
THAI on Monday appointed four new board members to replace its civilian directors. The three retired air chief marshals remain on the eight-member board.
The company has outstanding debts worth 200 billion baht, 30% of which are owed domestically.