ICYMI: Thai banks face biggest default since '97 crash

[webfact]

Thai Banks Face Biggest Default Since '97 as Steel Venture Fails
David Yong Anuchit Nguyen

(Bloomberg)Teesside, a gritty steel making district in England’s north east, is almost as far removed as you can get from the steamy streets of Bangkok. The two collided this week to inflict the biggest default on Thai bankers since the Asian financial crisis.

Sahaviriya Steel Industries Pcl, the Bangkok-based operator of Southeast Asia’s largest flat-steel manufacturing complex, reneged on 50 billion baht ($1.4 billion) of loans Monday following the failure of its four-year old U.K. venture. The group said it was suspending production at the Teesside plant, which employs about 2,000 people, amid a drop in prices and a supply glut stemming from slowing economic growth in China.

Thailand’s biggest default since Thai Petrochemical Industry Pcl buckled under $3.8 billion of liabilities during the 1997 Asian crisis looks set to knock earnings at Siam Commercial Bank Pcl, Krung Thai Bank Pcl and Tisco Financial Group Pcl, which combined had extended most of credit. As they negotiate a restructuring, the three leading creditors to the company will take a hit to their current quarterly earnings that could, in the case of Tisco at least, wipe out any profit entirely, SCB Securities Co. says.

“Sahaviriya Steel overinvested in the U.K. and steel prices went down continuously from there,” said Suchada Pantu, an executive vice president in Bangkok at Thai Rating & Information Services Co. “They used too much debt because they couldn’t issue enough equity and bonds at that time. Now they have to find new partners” to survive, she said.

Full story: http://www.bloomberg.com/news/articles/2015-09-24/thai-banks-face-biggest-default-since-97-as-steel-venture-fails

-- BloombergBusiness 2015-10-01

[shirtless]

They certainly took a big risk in such uncertain times now they can line up at the barber shop and take a haircut.

[worgeordie]

All the loans would have been secured,right,just like it is for

normal people and small companies.

regards worgeordie

[jonclark]

Feel sorry for the UK workers who will lose their jobs due to this situation.

[arfurcrown]

So yet again are about to see Thailand leading the rest of the region into financial turmoil ?

The whole deal from the start was no more than a massive ego trip and the thought that the company involved would control the steel industry.

A pity no questions were asked as to why India's most successful trading group TATA industries were unloading the plant as quickly as they could.

[chiang mai]

I wouldn't get too excited at this stage, the loans are not yet classified as NPL, despite Bloombergs pretty chart, plus BOT made all three banks make provisions for this loan some time ago - the fact that the debt will be structured is also positive rather than simply written off.

[arfurcrown]

Have you not noticed chang mai that the unit is now not producing steel along with the workforce being laid off?

I think you'll find out that the owners are under the impression that the U.K. government (read taxpayer) will pay the debs and then all will be well.

Not going to happen.

[elgordo38]

They certainly took a big risk in such uncertain times now they can line up at the barber shop and take a haircut.

Seems I read on here somewhere that all is well with these 2 banks. Perhaps not? Personally I think both acted in a reckless manner and should be investigated. Good luck on that happening here. Reading the heading it seems to be tarring all Thai banks with the same brush.

[chiang mai]

Have you not noticed chang mai that the unit is now not producing steel along with the workforce being laid off?

I think you'll find out that the owners are under the impression that the U.K. government (read taxpayer) will pay the debs and then all will be well.

Not going to happen.

Yes I did, but, it's a syndicated loan that is spread quite wide from the sounds of things, I think it's too much of a giant leap to think that potential default (it's being restructured) is the lead in to Thai bank failures. I agree however that it's not exactly great for either UK Plc nor Thailand.

[elgordo38]

They certainly took a big risk in such uncertain times now they can line up at the barber shop and take a haircut.

Incredible the world is in such terrible shape and the stock markets keeps chugging along with only a couple minor hiccups.

[Thai at Heart]

The place was already mothballed when SSI took it on. Crazy bit of business.

[SheungWan]

All the loans would have been secured,right,just like it is for

normal people and small companies.

regards worgeordie

No, not just like it is...... Formally yes, but the size of the default and where the debt loss lays is an issue. Also now, attention is drawn as to whether similar debt problems are sitting in the Thai banking system, so there is a potential knock-on effect.

Edited October 1, 2015 by SheungWan

[NCFC]

The Asian '97 crash started in Thailand with the collapse of a single bank (BCCI) which brought down all the other Thai finance companies. I think over 100 went under then. if I remember correctly.

This could be a repeat given the state of oversupply in the property market,just as in '97, and the dollar debt that backed it up. At least this time the Thai baht is floating so the collapse may be spread over months rather than days. But I think the Thaitanic is doomed yet again.

[12DrinkMore]

They certainly took a big risk in such uncertain times now they can line up at the barber shop and take a haircut.

Incredible the world is in such terrible shape and the stock markets keeps chugging along with only a couple minor hiccups.

Well, I don't think that you can call almost 20% wiped off the world's stock markets in the last three months a hiccough.

Some 13 Trillion USD's all gone.

I am sure a few people felt that.

Edited October 1, 2015 by 12DrinkMore

[chiang mai]

The Asian '97 crash started in Thailand with the collapse of a single bank (BCCI) which brought down all the other Thai finance companies. I think over 100 went under then. if I remember correctly.

This could be a repeat given the state of oversupply in the property market,just as in '97, and the dollar debt that backed it up. At least this time the Thai baht is floating so the collapse may be spread over months rather than days. But I think the Thaitanic is doomed yet again.

Not really, BCCI was something else entirely.

[ALLSEEINGEYE]

Quick give the banks more money, they need to be bailed out so they can continue to rape and plunder society more.

[SOTIRIOS]

...look to those that allowed it to happen....

...a lot of money went somewhere...not nowhere...trace it....

[SOUTHERNSTAR]

All the loans would have been secured,right,just like it is for

normal people and small companies.

regards worgeordie

Yes secured with asset at inflated prices. With the true value of these assets becoming more clear as the commodity markets weakens they should face a 50% plus write off. Banks these days like to value industrial assets at market value instead of at 50% of productive value, well for friends in any case, for you and me it will be below productive value.

[fred Kubasa]

Clear eveidence that THai businesses and Thai banks , as sucessful as they

may be here, usually due to a poorly educated public, the cannot play with

the educated/professional big boys. Best , in the future they both confine

their activities to financing SMEs like street sellers of chicken and the

like !

[chiang mai]

It's clear evidence of zip. And I'll wager my Asian bank stays afloat a lot longer after your American bank has sunk.

[Shiver]

They certainly took a big risk in such uncertain times now they can line up at the barber shop and take a haircut.

Incredible the world is in such terrible shape and the stock markets keeps chugging along with only a couple minor hiccups.

Well, I don't think that you can call almost 20% wiped off the world's stock markets in the last three months a hiccough.

Some 13 Trillion USD's all gone.

222.jpg

I am sure a few people felt that.

Ouch! and that chart looks like it hasn't found it's floor just yet either.

[apetley]

They certainly took a big risk in such uncertain times now they can line up at the barber shop and take a haircut.

Incredible the world is in such terrible shape and the stock markets keeps chugging along with only a couple minor hiccups.

Well, I don't think that you can call almost 20% wiped off the world's stock markets in the last three months a hiccough.

Some 13 Trillion USD's all gone.

222.jpg

I am sure a few people felt that.

One thing my old economics teacher told me was always mistrust the motive of somebody who publishes a graph that doesn't begin at zero.

[luckyman]

Posted today, it reads on top, I knew about this 4 days already, seems the new owners have a different view of what's NEWs and what isn't

[Dogmatix]

All the loans would have been secured,right,just like it is for

normal people and small companies.

regards worgeordie

Secured on the plant which is now scrap metal and maybe on worthless SSI shares. The banks all claim they have already made adequate provisions. But they usually say that based on valuing the assets as a going concern. Staff severance and liquidation costs, including safe clearance of the plant, are prior claims over creditors. So there might not be much left.

[mankondang]

Whilst the Thai banks who lent the money are at some fault in this sector, we should take a closer look at what the OP said when he referred to both the steel industry and it's connection to the China' market involvement. The Australia economic down turn, and increased unemployment, has suffered considerably over it's overdependence on iron ore exports to China. Just ask any Aussie expat about this, and about the huge impact it has had on the Australian Dollar exchange rate decline to the Thai Bhat, and other currencies.

Yes banks worldwide need to be more responsible. The US banks irresponsible overlendding resulted in the relatively recent world wide recession which cost many, including myself, a more than significant amount. Yet all these banks can still manage to reward their directors etc disgustingly huge bonuses.

[quandow]

I hate to think this, but I think this is the first of many such situations. Like dominoes, they will start falling, knocking down others. The implosion of China's economy has been predicted for some time due to their "ghost cities."

[Prbkk]

I wouldn't get too excited at this stage, the loans are not yet classified as NPL, despite Bloombergs pretty chart, plus BOT made all three banks make provisions for this loan some time ago - the fact that the debt will be structured is also positive rather than simply written off.

You may well be correct about this case. The real test will come over the next year and beyond when the full extent of the non performing loans becomes apparent.

[slapout]

Another thing many people overlook, forget or even ignore is envirement clean up at some of these sites due to pollution that was overlooked in past years but not anymore. Now you have the tree huggers who are getting more and more support /legal backing to force bring abondoned sites back to the orginal, beautiful unspoiled playground that it was years ago. mor4e massive expense quite possible with todays, ''lets stick it to them '' attitude which seems very popular, especially by those on the dole /welfare who contribute quite little in tax dollars required if there are not enough value in assets to cover debts, taxes,, clean up , wages due, pensions, etc

[Thai at Heart]

Another thing many people overlook, forget or even ignore is envirement clean up at some of these sites due to pollution that was overlooked in past years but not anymore. Now you have the tree huggers who are getting more and more support /legal backing to force bring abondoned sites back to the orginal, beautiful unspoiled playground that it was years ago. mor4e massive expense quite possible with todays, ''lets stick it to them '' attitude which seems very popular, especially by those on the dole /welfare who contribute quite little in tax dollars required if there are not enough value in assets to cover debts, taxes,, clean up , wages due, pensions, etc

Hardly the case. Probably the only thing worth anything on the site is now the land itself. Anyone fancy building a house on a piece of land that has had steel making on it for 100 years.

Land regeneration is the best policy economically, and ecologically. Unless u want to keep digging up Virgin land.

[smotherb]

It's clear evidence of zip. And I'll wager my Asian bank stays afloat a lot longer after your American bank has sunk.

Yes, you are wagering.