Local, foreign creditors back govt's move to put THAI under bankruptcy protection

[webfact]

Local, foreign creditors back govt's move to put THAI under bankruptcy protection

By The Nation

 

 

Creditors are supporting the government's move to have Thai Airways International (THAI) seek bankruptcy protection, while the Finance Ministry is preparing to negotiate the sale of 3 per cent of its stake in the airline, which will make the national carrier lose its state enterprise status.

 

An informed source in the financial sector said on Wednesday (May 20) that THAI’s domestic and foreign creditors have signalled that they want the airline to seek bankruptcy protection. The creditors also have appointed lawyers to negotiate the repayment of debt, while the Transport Ministry has been assigned by the Cabinet to file for the airline’s rehabilitation with the Bankruptcy Court. 

 

According to THAI’s 2019 financial statement, its debt obligations stand at Bt147.4 billion. 

 

The debt comprises Bt46.5 billion incurred from the leasing of planes with 32 planes used as collaterals for loans from foreign banks, including banks in France and Japan. Another chunk of the debt is Bt74.1 billion in loans, of which Bt2 billion is owed to Krung Thai Bank, Government Savings Bank, and CIMB Thai, Bt8.9 billion taken in long-term loans from banks in Germany and the United states, and a short-term debt worth Bt3.5 billion.

 

The airline also owes a Bt11.9-billion foreign currency denominated debt to the Finance Ministry and Bt437 million owed to the Export-Import Bank of Thailand.

 

“If the rehab process moves fast and some businesses can be split apart, then THAI could recover within a year,” the source said, though he conceded that if the Finance Ministry cuts its holding to below 50 per cent, then THAI will find it tough to raise funds in the future. 

 

Finance Ministry officials are scheduled to meet with representatives of Vayupak Fund today (May 21) to discuss the option of selling off shares after the Cabinet approved the ministry’s proposal to reduce its holding to 48 per cent. The ministry plans to sell 3.17 per cent of its shareholding to the fund. 

 

Initially the two sides agreed to price the shares at a seven-day average and a 15 to 20 per cent discount. The ministry is expected to get approximately Bt600 million to Bt700 million from the transaction. 

 

Finance Minister Uttama Savanayana has said that the sale of shares should be completed within next week.  

 

THAI’s share price has risen sharply over the past two months, closing at Bt5.4 on Wednesday – up almost 15 per cent from the previous day and touching the upper ceiling for the eight time in two months. 

 

Meanwhile, Tisco Security has warned that investing in the airline may be too high a risk, citing the fact that few companies have had success in rehab. Since the 1997 financial crisis, 52 firms filed for bankruptcy protection, and 20 or 38 per cent have failed and been removed from the stock market. Nine firms are still under rehabilitation and trading in their shares has been suspended, while 23 firms, representing 44 per cent, have been successfully rehabilitated and have returned to normal trading. 

 

Rehabilitation on average takes seven years, a Tisco analyst said. 

 

The Transport Ministry is expected to file for bankruptcy protection on THAI’s behalf in mid-June with Thai and US courts. Transport officials and THAI’s management team will submit a list comprising 30 names for the rehab management team to Prime Minister Prayut Chan-o-cha on May 25 for consideration.

 

Source: https://www.nationthailand.com/business/30388211

 

-- © Copyright The Nation Thailand 2020-05-21

 

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[Justgrazing]

14 minutes ago, webfact said:

Creditors are supporting the government's move to have Thai Airways International (THAI) seek bankruptcy protection

 

 

[Creasy]

Just pull the plug on their life support system already.

[Fex Bluse]

I had a dream that THAI was forced to privatise, a western conglomerate did a hostile takeover of it and renamed it FARANG Air. 

 

I can't think of a more massive loss of FACE than that. 

 

Was such a good dream 

[alyx]

I admit that I am an ignorant when it comes to financial matters let alone bankruptcy but there is something I do not understand and that is a genuine question: Thai will cease to be a state enterprise as soon as the sale is effective ( within a week ) so  why is the management team to be chosen by the government ? 
Also, I cannot help but notice the time frame predicted for recovery: one year. They had at least five years with plenty of money and they did not make it. Why, suddenly, would that  work ? 
i am just trying to understand.
 

[PETERTHEEATER]

4 hours ago, webfact said:

If the rehab process moves fast and some businesses can be split apart, then THAI could recover within a year

Unbelievable!

[crobe]

Local, foreign creditors back govt's move to put THAI under bankruptcy protection

 

Err - No, most of the foreign creditors would prefer the government to bail it out and get their money back - this was the guarantee they got when they loaned them the money - it is a state enterprise it cannot go bust.

As soon as the government stake is reduced and Thai goes through a restructuring under debt protection they are liable to lose most of their investment as this is hived off into a zombie company and a "new Thai" shorn of the debt is allowed to continue.

You can already see creditors such as Airbus calling in the debts, I expect most of the other foreign creditors will do the same.

 

 

[edwinchester]

2 hours ago, alyx said:

I admit that I am an ignorant when it comes to financial matters let alone bankruptcy but there is something I do not understand and that is a genuine question: Thai will cease to be a state enterprise as soon as the sale is effective ( within a week ) so  why is the management team to be chosen by the government ? 
Also, I cannot help but notice the time frame predicted for recovery: one year. They had at least five years with plenty of money and they did not make it. Why, suddenly, would that  work ? 
i am just trying to understand.
 

They're trying to paint a rosey outcome for the whole sorry mess that's all.

Downsizing and several years of pain for Thai is almost certain but if they install a top class, experienced management team they should be able to turn things around.

[robblok]

The government should sell off even more shares so private parties can make more decissions. That would mean that competent people would be put in place instead of retired generals and so on.

 

But i think that is one bridge too far for them. They don't want to lose the perks.

 

As for people saying this is bad, it is but its how many companies do it go bankrupt and make a restart. Not real strange. It often beats the alternative of going totally broke and then there is nothing left to divide. 

[herfiehandbag]

3 hours ago, alyx said:

I admit that I am an ignorant when it comes to financial matters let alone bankruptcy but there is something I do not understand and that is a genuine question: Thai will cease to be a state enterprise as soon as the sale is effective ( within a week ) so  why is the management team to be chosen by the government ? 
Also, I cannot help but notice the time frame predicted for recovery: one year. They had at least five years with plenty of money and they did not make it. Why, suddenly, would that  work ? 
i am just trying to understand.
 

I'm with you when it comes to knowledge of such financial matters. Taking into account what this chap explains:

21 minutes ago, crobe said:

Local, foreign creditors back govt's move to put THAI under bankruptcy protection

 

Err - No, most of the foreign creditors would prefer the government to bail it out and get their money back - this was the guarantee they got when they loaned them the money - it is a state enterprise it cannot go bust.

As soon as the government stake is reduced and Thai goes through a restructuring under debt protection they are liable to lose most of their investment as this is hived off into a zombie company and a "new Thai" shorn of the debt is allowed to continue.

You can already see creditors such as Airbus calling in the debts, I expect most of the other foreign creditors will do the same.

 

 

I suspect that this is a wheeze on the part of the government. They sell their majority shareholding (or at least enough to end TGs status as a state enterprise) and they avoid liability for its debts and make a quick few hundred million into the bargain.  The major creditors end up losing their money, and whatever emerges as the new Thai Airways will be a much scaled down operation. And if the creditors put the boot in and finish it off - well then the filthy foreigners did it...

 

Win, win!

[pixelaoffy]

All these ways of avoiding paying debts! Happens in other countries but you can be sure this so called ' bankruptcy' won't be a company being responsible and liable for its Debts ! There should be a receiver trying to sell the business( impossible) or selling it's assets , none of this will happen !  It will reform rebrand , it won't have foreign CEO or management ! Just remember it's the taxpayers of the country who foot the bill in what will continue long after this ' " non bankruptcy '  . 

Edited May 21, 2020 by pixelaoffy

[Fex Bluse]

2 hours ago, crobe said:

Local, foreign creditors back govt's move to put THAI under bankruptcy protection

 

Err - No, most of the foreign creditors would prefer the government to bail it out and get their money back - this was the guarantee they got when they loaned them the money - it is a state enterprise it cannot go bust.

As soon as the government stake is reduced and Thai goes through a restructuring under debt protection they are liable to lose most of their investment as this is hived off into a zombie company and a "new Thai" shorn of the debt is allowed to continue.

You can already see creditors such as Airbus calling in the debts, I expect most of the other foreign creditors will do the same.

 

 

Or they'll simply start seizing Thai assets which will be enjoyable news. Thai has property in foreign countries that banks can seize if their creditor debt obligations aren't met. 

[alyx]

Unless they file bankruptcy in each of these countries ....no? 

[blackcab]

7 hours ago, alyx said:

Thai will cease to be a state enterprise as soon as the sale is effective ( within a week ) so  why is the management team to be chosen by the government ?

 

Because government departments or government owned investment funds will still own over 51% of the company after the sale. As such, they would automatically win any resolution put to a shareholders meeting if one was called.

 

The sale is a matter of shuffling shares from state entities that count as State Enterprises to state owned investment funds that do not count as State Enterprises. The reason for doing this is that State Enterprises are governed by their own particular laws and restrictions. For example, by moving Thai Airways out of the State Enterprise system the Thai Airways workers union will be curtailed, giving the government the ability to make redundancies.

[anon7854]

Call me stupid or old fashioned but as a former manager I fail to realise how it is possible for companies to go bankrupt after 3 months of no income when last year you made 500 million THB PROFIT.

PROFIT!  Not revenues , PROFIT! Where did those money go?   How is it possible for a company in full lockdown to lose money? You don't pay salaries ,your planes don't consume fuel , you don't have any expense. Granted you don't get money in ... but <deleted> you made 500 million profit last year...where did that go?

 

This bankrupty job looks to me very shady. Guess someone is after a big jackpot...

 

Edited May 21, 2020 by anon7854

[rickudon]

500 million baht is peanuts. And yes, they do have costs - As far as i know, no staff have been made redundant, and their wage bill for 22,000 staff will eat that 500 million in a month. Some staff will be working on essential maintenance, rents for planes and offices are still due, parked planes have to pay a daily parking fee. Interest on their debts is probably hundreds of millions a month.