Corporate bonds worth more than 25 billion baht have postponed payments this year, according to the Thai Bond Market Association (TBMA), noting that fewer defaults are expected for the remainder of 2024 as economic conditions improve, with interest rates on a downward trend.
Sirinart Amornthum, senior vice-president of TBMA, said the ongoing economic recovery and declining interest rates benefit corporate bond issuers, lowering their costs.
As a result, the association expects fewer bond defaults for the remainder of 2024 than the amount reported this year-to-date.
This week two listed companies -- Nawarat Patanakarn (NWR) and Eastern Power Group (EP) -- postponed bond repayments worth hundreds of millions of baht each.
Earlier this year, Italian Thai Development (ITD) postponed payments on its bonds worth 15 billion baht, and in July Energy Absolute (EA) announced a similar action involving 6.2 billion baht worth of bond principal and interest.
Combined with smaller defaults, more than 25 billion baht worth of bond principal and interest payments have been postponed this year, said Ms Sirinart.
"A slowing economy has caused some companies to lack liquidity, leading to postponement of their debt repayment. For example, both NWR and EP are in sectors that have not recovered yet," she said.
NWR is in the property sector with a focus on housing and government projects. A delay of government budget disbursements and commercial banks' tightening of lending standards, particularly in the property sector, adversely affected the company.
Meanwhile, EP was affected by the impact of the global economic slowdown and lower energy prices, said Ms Sirinart.
TBMA said for the remainder of this year, it expects recovering global and domestic economies to help ease the liquidity problems of debenture issuers, resulting in fewer companies postponing debenture payments. However, investors are advised to remain cautious when investing in bonds because the economy has not fully recovered, focusing on bonds with investment-grade ratings or higher, she said.
The Securities and Exchange Commission (SEC) encouraged bondholders of NWR and EP to attend the bondholders' meetings today because both companies have important agendas, including the extension of the maturity dates for the bonds.
The SEC also required bondholder representatives to analyse the benefits and shortcomings as well as the potential impacts on bondholders for both approval and denial of these matters, offering supporting reasons for both.
"Bondholders are encouraged to thoroughly review the information and exercise their rights to protect their interests," the regulator said in a statement. "They should make necessary inquiries to the bondholder representative to obtain complete information before making an informed decision at the bondholders' meetings."