If Thai Airways International Plc (THAI) were to go under on decision day, which is Wednesday, creditors would only be paid 12.9% of what is owed to them, a source at the airline warned.
On Wednesday, 13,000 creditors are voting on whether to accept or reject the debt rehabilitation plan prepared by the company. If they vote it down, the airline will be declared bankrupt and the creditors will walk away with 12.9% of what the airline owes them, the source said.
In the event THAI goes into bankruptcy, the next step involves appraising the airline's assets to determine how much the company is able to repay of its debts. The 12.9% estimation, which is a gauge of the airline's repayment capability, is based on the value of the assets the company currently holds.
In early March, the company submitted its rehabilitation plan to the Legal Execution Department, covering debts amounting to around 410 billion baht, after the proposed debt-restructuring plan had been accepted by the Central Bankruptcy Court. Major shareholders between themselves own about 180 billion baht of the total 410 billion baht's worth of THAI's debt.
But if the rehab plan gets adopted at today's meeting, the airline will probably be given a significant period of time to sort out its affairs and turn its financial woes around.
THAI's rehab plan calls for an extension of the repayment of debt stemming from debentures worth 70 billion baht to a 10-year period, with a debt moratorium allowed in the early stages of repayment, according to the source.
THAI is implementing rigorous cost-cutting measures which so far include shedding several thousand of its employees from its 20,000-strong workforce via early retirement schemes.
The source added the rehab plan does not stipulate that the Finance Ministry must secure a loan to ease the airline's liquidity crunch totaling 50 billion baht.
The plan loosely states that anyone can procure the loan, with the ministry helping during negotiations to obtain cash infusions.
The source said the plan also does not require a haircut to be made as several of the cooperatives form a large group of the creditors who own a combined 40 billion baht's worth of THAI's debentures.
The cooperatives objected to a haircut out of concern the move would mar the cooperatives' financial standing which could spark a panic withdrawal of savings by their members.
The source also said that more than 10 creditors were seeking to revise several areas of the rehab plan. Some have indicated they might opt to defer their vote in today's meeting.
Although the Finance Ministry has the largest chunk of THAI's shares, at 49.9%, it is not the biggest creditor. In fact, its portion of the debt is dwarfed even by the combined value of the airline's bonds held by the cooperatives.