SCB ready to extend relief to hospitality

SCB ready to extend relief to hospitality

Debt holiday scheme could be prolonged

Customers wait to be served at a branch of Siam Commercial Bank in Bangkok.
Customers wait to be served at a branch of Siam Commercial Bank in Bangkok.

Siam Commercial Bank (SCB) is ready to prolong its debt holiday programme for the hospitality business in case the Bank of Thailand does not extend its targeted debt relief measures due to expire in June.

The central bank implemented targeted debt moratorium measures in mid-October 2020 for small and medium-sized enterprises (SMEs) with a credit line below 100 million baht that had difficulty servicing existing debts.

The targeted measures are due to end on June 30 of this year. This only applies to targeted SMEs that cannot manage to repay loans to financial institutions because their business operations have not fully recovered.

The measures are an adjusted extension of the broad-based debt relief measures rolled out by the central bank on April 23 of last year to help SMEs reeling from pandemic fallout, which ended on Oct 22, 2020.

The bank is prepared to extend the debt holiday measures to commercial borrowers who cannot service their debt liabilities because of the impact of the pandemic, especially hospitality business operators, on a case-by-case basis, said SCB president Sarut Ruttanaporn.

SCB, Thailand's fourth largest commercial lender by total assets, has outstanding hospitality loans of around 80 billion baht against the bank's total loan portfolio of 2.25 trillion.

The bank's hospitality loan portfolio represents the largest portion among its local banking peers. Around 90% of total outstanding loans in the hospitality loan portfolio applied for the debt relief measures using different methods, including a suspension of principal and interest, whereby such assistance is offered on a case-by-case basis.

"Given the good loan quality of hotel borrowers [before the pandemic emerged], we are not concerned with asset quality that much and most of them are expected to return to normal business operations when the government reopens the country to foreign tourist arrivals," said Mr Sarut.

On average, the loan-to-value of the hotel business is quite low, standing at around 40-60%, and the majority of the businesses have been long-time customers of SCB. Most hotel borrowers recorded a positive business performance, but have since stumbled because of the pandemic.

SCB is also waiting to assess clearer details on the asset warehousing programme before deciding whether to participate in it or not, he said.

The Bangkok Post reported earlier the asset warehousing programme in principle allows business operators to suspend debt repayment and transfer property assets, as loan collateral, to their creditors temporarily within a specific time frame.

Business operators would then be allowed to either lease these frozen assets from the creditors to continue their business operations or let the creditors manage the frozen assets.

Separately, SCB plans to grant an additional credit line worth 1.5 million baht to the financially-beleaguered Pace Development Corporation Plc for the Nimit Langsuan condominium project this year, said Mr Sarut.

The credit line would support the company to be able to complete the luxury residential project by this year and commence the transfer of condo units next year, he said. Under this scenario, Pace would repay debt liabilities of around 5 billion baht in 2022.

It was reported in March 2020 that Pace owed 11 billion baht to SCB, of which 7 billion baht comprised collateral-backed loans.

Pace's total liabilities stood at 19.6 billion baht against total assets of 18.4 billion as of March 2020. Pace's financial woes emerged in 2017 when it defaulted on a bills of exchange payment, with many viewing its choice of using short-term debt instruments in the capital market to fund long-term investment projects as the source of financial stress.

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