Thai Billionaire’s Debt Spree Evokes Asian Crisis Memory

[Lite Beer]

Thai Billionaire’s Debt Spree Evokes Asian Crisis Memory
By David Yong

A borrowing spree by Thai billionaire Dhanin Chearavanont that raised debt to almost six times equity is adding to mounting corporate liabilities and reviving memories of the 1997 Asian crisis.

Dhanin’s CP All Pcl (CPALL), operator of 7-Eleven stores, has increased total debt to 5.8 times equity as of Sept. 30 from zero two years ago, data compiled by Bloomberg show. The number of Thai companies with debt more than double equity has risen to 53 out of 620 from 42 in 2007.

Standard & Poor’s says that, while a crisis isn’t imminent, overstretched Thai borrowers have become more susceptible to downturns as global economic growth falters. The region has also protected itself by developing local debt markets since Southeast Asian banks and property developers struggled to meet overseas borrowings in the 1997 crisis.

“We believe Thai companies haven’t been tested under very stressed conditions, especially with their current higher debt load,” said Xavier Jean, a Singapore-based analyst at S&P. “We haven’t seen the full impact of rising interest rates and the macroeconomic headwinds in the region and China.”

Read More: http://www.bloomberg.com/news/2014-12-11/thai-billionaire-s-debt-spree-evokes-asian-crisis-memory.html

--Bloomberg 2014-12-12

[worgeordie]

History will replete itself ,as people will never learn,in this case

i think CP is just trying to regain what it had to sell off in the

last crash,through overextending itself with debit,now i believe

they would like to buy back Tesco-Lotus..

regards Worgeordie

[givenall]

greed is root of all evil. In Thailand case rich fit the bill

[Harsh Jones]

History will replete itself ,as people will never learn,in this case

i think CP is just trying to regain what it had to sell off in the

last crash,through overextending itself with debit,now i believe

they would like to buy back Tesco-Lotus..

regards Worgeordie

There is a pretty big difference with regards to Thailand these days. Thailand is a creditor nation with sizable trade surpluses. In 1997, Thailand was a debtor nation with trade deficits. Now the US is the prime debtor nation with massive trade deficits. It should be interesting to watch this play out.

[Harsh Jones]

greed is root of all evil. In Thailand case rich fit the bill

Greed and money is the route to all progress. How much capital investment in machinery and industrial production that results in job creation and higher standards of living would result if every millionaire and billionaire took their money and wasted it away in the Bahamas rather then do the greedy thing and reinvest it ?

[Anthony5]

History will replete itself ,as people will never learn,in this case

i think CP is just trying to regain what it had to sell off in the

last crash,through overextending itself with debit,now i believe

they would like to buy back Tesco-Lotus..

regards Worgeordie

There is a pretty big difference with regards to Thailand these days. Thailand is a creditor nation with sizable trade surpluses. In 1997, Thailand was a debtor nation with trade deficits. Now the US is the prime debtor nation with massive trade deficits. It should be interesting to watch this play out.

You must get other news sources than the average people.

http://www.reuters.com/article/2014/11/17/thailand-economy-gdp-idUSL3N0T433E20141117

[worgeordie]

History will replete itself ,as people will never learn,in this case

i think CP is just trying to regain what it had to sell off in the

last crash,through overextending itself with debit,now i believe

they would like to buy back Tesco-Lotus..

regards Worgeordie

There is a pretty big difference with regards to Thailand these days. Thailand is a creditor nation with sizable trade surpluses. In 1997, Thailand was a debtor nation with trade deficits. Now the US is the prime debtor nation with massive trade deficits. It should be interesting to watch this play out.

True,but we are talking about one man,one company here.

regards Worgeordie

[ezzra]

A true measure of a billionaire is not by how much he's worth, rather than how much he owes..

[HUAHIN62]

History will replete itself ,as people will never learn,in this case

i think CP is just trying to regain what it had to sell off in the

last crash,through overextending itself with debit,now i believe

they would like to buy back Tesco-Lotus..

regards Worgeordie

There is a pretty big difference with regards to Thailand these days. Thailand is a creditor nation with sizable trade surpluses. In 1997, Thailand was a debtor nation with trade deficits. Now the US is the prime debtor nation with massive trade deficits. It should be interesting to watch this play out.

Economic and finance principles stays the same. Thailand rely on exports for 70% of its GDP and another 9% on tourism. Any international downturn will hurt the Thai economy and any Thai company that is levered too much. Interest rates will also increase which would be a double whammy for companies like CP. He however will rely on a government bailout as payback for supporting the winning side.

[Saan]

CP is also spreading its wings with plans to open 500 restaurant outlets in Australia. The first of its Australian fast food outlets was opened in July.

[quidnunc]

A true measure of a billionaire is not by how much he's worth, rather than how much he owes..

I assume you mean "A true measure of a billionaire is not by how much he's worth but rather by how much he owes."

A true measure of what exactly? What kind of financial measure is it that wouldn't measure how much said billionaire is worth? I have to congratulate on concocting an aphorism that has layers and layers of unmeaning.

[clockman]

CP is also spreading its wings with plans to open 500 restaurant outlets in Australia. The first of its Australian fast food outlets was opened in July.

Good luck, to people who eat there!

[AnotherOneAmerican]

I would like to borrow 6x my current assets.

Any offers?

[Chris Lawrence]

Cash is king. The late 80's recession was all about overstretched companies. Alan Bond was good at that along with Chris Skase. They just need a change in direction and all the cards could fall down.

[Gentmartin]

Post wedding, I would also like to borrow 6x my assets please, so if anyone does have a spare 120Baht, get in touch. Thank you

PS Change that, just discovered a 50st coin down the back of the sofa (wifes sofa !) and 46.75Baht and 18 e-stamps on a long forgotten 7 card....yippee, its dinner time folks

[Eric Loh]

Nothing wrong with sounding caution but debt is good when its serviceable. In the case of CP debt, all their acquisitions generate revenues unlike the 1997 borrowings mainly for the already heated up real estates which don't generate revenues until there were sold. The excess real estates plummeted leaving borrower of off shore cheap USD unserviceable.

[JacChang]

He used debt to purchase ALMOST all of makro's shares.

I am one of the less than 1% shareholding investors left

[Mudcrab]

Nothing wrong with sounding caution but debt is good when its serviceable. In the case of CP debt, all their acquisitions generate revenues unlike the 1997 borrowings mainly for the already heated up real estates which don't generate revenues until there were sold. The excess real estates plummeted leaving borrower of off shore cheap USD unserviceable.

Shame most of Red Thailand didn't heed this advice when Mr T introduced the village loan scheme. Aren't they paying for this folly now!!

[Eric Loh]

Nothing wrong with sounding caution but debt is good when its serviceable. In the case of CP debt, all their acquisitions generate revenues unlike the 1997 borrowings mainly for the already heated up real estates which don't generate revenues until there were sold. The excess real estates plummeted leaving borrower of off shore cheap USD unserviceable.

Shame most of Red Thailand didn't heed this advice when Mr T introduced the village loan scheme. Aren't they paying for this folly now!!

The Village Fund is more a social rather than a financial intermediary. May suprise you to note that the loan recovery is actually very good. I guess the poor has much better sense of borrowing responsibilties than the wealthy every where in the world.

[Anthony5]

Nothing wrong with sounding caution but debt is good when its serviceable. In the case of CP debt, all their acquisitions generate revenues unlike the 1997 borrowings mainly for the already heated up real estates which don't generate revenues until there were sold. The excess real estates plummeted leaving borrower of off shore cheap USD unserviceable.

Shame most of Red Thailand didn't heed this advice when Mr T introduced the village loan scheme. Aren't they paying for this folly now!!

The Village Fund is more a social rather than a financial intermediary. May suprise you to note that the loan recovery is actually very good. I guess the poor has much better sense of borrowing responsibilties than the wealthy every where in the world.

Has nothing to do with sense, the poor simply don't get a loan.

[konying]

Another possibility might be to borrow as much as possible as crisis is coming.

Debts get written off, personal wealth remains hidden away

[Chao Lao Beach]

A true measure of a billionaire is not by how much he's worth, rather than how much he owes..

Yes, but true for everyone with a leased car, big loans for a house etc.

Try buying a new car in Thailand with cash, it is actually difficult. They make much more money selling to someone needing credit, hence you just keep getting pushed back.

[MZurf]

History will replete itself ,as people will never learn,in this case

i think CP is just trying to regain what it had to sell off in the

last crash,through overextending itself with debit,now i believe

they would like to buy back Tesco-Lotus..

regards Worgeordie

Do you mean "in debt"? That is not the same as "in debit".

[poweratradio]

History will replete itself ,as people will never learn,in this case

i think CP is just trying to regain what it had to sell off in the

last crash,through overextending itself with debit,now i believe

they would like to buy back Tesco-Lotus..

regards Worgeordie

There is a pretty big difference with regards to Thailand these days. Thailand is a creditor nation with sizable trade surpluses. In 1997, Thailand was a debtor nation with trade deficits. Now the US is the prime debtor nation with massive trade deficits. It should be interesting to watch this play out.

Is there a chance the Baht will increase more than it's current approx. value of 30 to 1 dollar ratio like say to older higher levels if this is about a repeat of history??

[jandj]

Might be a few nervous lenders watching ?

[nkg]

greed is root of all evil. In Thailand case rich fit the bill

Greed and money is the route to all progress. How much capital investment in machinery and industrial production that results in job creation and higher standards of living would result if every millionaire and billionaire took their money and wasted it away in the Bahamas rather then do the greedy thing and reinvest it ?

In my opinion, you have it backwards. "Wasting" their money in the Bahamas would mean that they were spending - spending being the thing that drives economic growth.

But ultra-rich people do not spend - instead, they "invest", hoarding their money in a way that benefits nobody.

[BlackJack]

make sure you have some US$

in a safe place

ie under the mattress

[TallGuyJohninBKK]

So the long Bloomberg article says CP All issued 80 BILLION baht ($2.4 billion U.S.) worth of bonds this year, 2014 -- up 60% from their debt offerings in 2013. And 188 BILLION in total debt as of Sept. 30.

Yet it says almost nothing about what CP has done or is planning to do with the funds that they raised.

With all that mounting debit, I wonder if a price hike is coming for the pork and sticky rice burgers at my local 7-11???

Edited December 14, 2014 by TallGuyJohninBKK

[spidermike007]

If Thailand suffers a financial crisis, as it did in the late 90's, where will interest rates go? Are there fixed rate loans for buying homes here, or are they all adjustable? If so, how high could they go?

[Harsh Jones]

History will replete itself ,as people will never learn,in this case

i think CP is just trying to regain what it had to sell off in the

last crash,through overextending itself with debit,now i believe

they would like to buy back Tesco-Lotus..

regards Worgeordie

There is a pretty big difference with regards to Thailand these days. Thailand is a creditor nation with sizable trade surpluses. In 1997, Thailand was a debtor nation with trade deficits. Now the US is the prime debtor nation with massive trade deficits. It should be interesting to watch this play out.

Economic and finance principles stays the same. Thailand rely on exports for 70% of its GDP and another 9% on tourism. Any international downturn will hurt the Thai economy and any Thai company that is levered too much. Interest rates will also increase which would be a double whammy for companies like CP. He however will rely on a government bailout as payback for supporting the winning side.

If the USD does what the baht did in 1997 (same conditions. and yeah I know, it will never happen) then everything priced in USD will get cheaper for Thais as the $ crashes and the baht floats.

So yeah, economic and finance principals stay the same