Buyers of Thai distressed assets plan big purchases as debt payment holiday ends

By Orathai Sriring and Satawasin Staporncharnchai

 

FILE PHOTO: A woman wearing a mask as a protection against the coronavirus disease (COVID-19) waits to cross the street during a rainy night at Ratchadamnoen Avenue in Bangkok, Thailand, August 22, 2020. REUTERS/Jorge Silva/File Photo

 

BANGKOK (Reuters) - A pandemic-exacerbated surge in Thai bad loans to nine-year highs and the end of a debt payment holiday are prompting buyers of distressed debt to embark on a shopping spree in Southeast Asia's second-biggest economy.

 

About 6.89 trillion baht ($221 billion) of outstanding Thai debt - or 42% of total lending - has been under relief programmes that include payment deferment and reduction, interest rate reduction and restructuring.

 

The most significant of these - a government-mandated six month debt payment holiday - ended on Thursday.

 

The Bank of Thailand has said it does not expect sudden and large defaults, but its former chief Veerathai Santiprabhob, whose term ended last month, warned in August bad debt could jump as the economy slumped.

 

The country's biggest distressed debt manager, Bangkok Commercial Asset Management, told Reuters it will spend 12 billion baht to acquire sour loans with a face value of about 40 billion baht this year.

 

"We will focus on buying debt this year and next," Bunyong Visatemongkolchai, the bank's executive board chairman said, adding it planned to issue 25 billion baht of bonds to fund purchases.

 

Its shares are up 11% this year, versus a 23% drop for the main stock index.

 

Easy credit for consumers and businesses for years have prompted many warnings about the dangers of the household debt malaise in Thailand. Those are now proving prescient as the pandemic batters businesses, leaving as many as three million people without work.

 

Thai household debt is among Asia's highest, at 83.8% of GDP as of June, the highest level since 2003, while the central bank predicts the trade and tourism-dependent economy could shrink by a record 7.8% this year.

 

Months of protests against the government and the monarchy could further slow a recovery for the economy.

 

Thailand's non-performing loans amounted to 509 billion baht as of June, a nine-year high of 3.09% of total lending, versus 2.98% at the end of 2019. Loans with a significant increase in credit risk hit 7.48% of lending, up from 2.79% at the end of last year.

 

Banks prefer keeping distressed assets in house to avoid expensive write-downs, but sometimes see no option but to sell.

 

"We will sell debt of businesses that have no potential," said Atipat Asawachinda, first senior vice president of Kasikornbank, which plans to offload 10 billion baht of bad debt this year.

 

JMT Network Services, the biggest buyer of distressed consumer loans, will spend a record 6 billion baht buying debt this year, CEO Sutthirak Traichira-aporn said.

 

"The amount of debt being sold in the market is so great that we don't have time to choose," he said, noting it had acquired debt with a face value of 12 billion baht at an average 84% discount in the first half.

 

JMT's shares have surged 66% this year.

 

Sutthirak said relief measures had only delayed the souring of loans, likening them to holding water behind a dam, "If there is too much, it will break out".

 

-- © Copyright Reuters 2020-10-22

 

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No good! Its a world wide issue. 

Bangkok Commercial Asset Management are the Chinese or Thai Chinese?

Not long to December...then we see how much devastation can occur, I guess not just here but around the world.  

12 hours ago, HiSoLowSoNoSo said:

Bangkok Commercial Asset Management are the Chinese or Thai Chinese?

Same goal for sure !

Lots of folks are going to lose there homes/ businesses / vehicles etc. used as collateral for these loans.

1 hour ago, Venom said:

Lots of folks are going to lose there homes/ businesses / vehicles etc. used as collateral for these loans.

I do believe you are right on this one, this especially as many Thai folk I have spoken to do not realise the consequences of signing a piece of paper on behalf of relatives and friends, thereby becoming a "guarantor" for the loan.

 

I fear there are going to be a lot of negative repercussions in the coming months as regards this, and as I alluded to, it will be a surprise to the guarantors.

My ole-man always said live with what you have in your ar*e pocket, get a mortgage for your house and save up for all the other things... this generation want everything brand new from day one.... 

Think it's bad now, just wait for the non-high season crash about to hit

I wonder what nationality all these buyers will be?....Mmmmmm?

If I were there I could be pondering with a bottle of wine or buying some toxic debt tonight looks like they are both about the same price ???? 

On 10/22/2020 at 5:26 PM, snoop1130 said:

The country's biggest distressed debt manager, Bangkok Commercial Asset Management, told Reuters it will spend 12 billion baht to acquire sour loans with a face value of about 40 billion baht this year.

 

"We will focus on buying debt this year and next," Bunyong Visatemongkolchai, the bank's executive board chairman said, adding it planned to issue 25 billion baht of bonds to fund purchases.

Their business model must be different to mine, 25B of bonds to purchase 12B of loans. Must be some great bonuses for the managers.

5 minutes ago, GreasyFingers said:

Their business model must be different to mine, 25B of bonds to purchase 12B of loans. Must be some great bonuses for the managers.

The 12B is for this year. The 25B is for this year and next. That seems to be their plan.

2 minutes ago, dabhand said:

The 12B is for this year. The 25B is for this year and next. That seems to be their plan.

Did not realise you were part of the company. Sorry.

Just now, GreasyFingers said:

Did not realise you were part of the company. Sorry.

Reading the OP does help. Sorry.

Profiteering; should be illegal.

9 hours ago, hotchilli said:

My ole-man always said live with what you have in your ar*e pocket, get a mortgage for your house and save up for all the other things... this generation want everything brand new from day one.... 

The Central Banks with their low and even negative interest rates want that the people drown in debt.  They should buy and consume. It started already with Greenspan and the housing bubble and the following banking crisis. This "guru" was always talking about the "wealth effect" that he creates with his low interest rates. And the Central Banks didn't learn anything out of this. Yes, they create a wealth effect - but not for the credit slaves. 

2 hours ago, dabhand said:

Reading the OP does help. Sorry.

First rule of TVF: never read the OP

So in the stock markets, the stocks on bad debts are called what? Futures?

  I am wondering just how many people make a good living on these kinds of

stocks?  I am not at all involved with stocks or the market, so I sleep very well

almost every night. Retirement should be more than worrying just how the stock market is 

doing.

Geezer

13 hours ago, onebir said:

First rule of TVF: never read the OP

Same as IKEA.....never read the instructions

3 minutes ago, Stargrazer9889 said:

So in the stock markets, the stocks on bad debts are called what? Futures?

  I am wondering just how many people make a good living on these kinds of

stocks?  I am not at all involved with stocks or the market, so I sleep very well

almost every night. Retirement should be more than worrying just how the stock market is 

doing.

Geezer

Futures are just contracts to purchase at a price a given amount on a given date...you are gambling on the price movement in the intervening time to make money....similar to shorting a stock..I guess.