Buyers of distressed Thai assets plan big buys as debt repayment holiday ends
BANGKOK (Reuters) – A spike exacerbated by Thailand’s bad debt pandemic to nine-year highs and the end of a debt repayment holiday is prompting distressed debt buyers to embark on a shopping spree in the second largest economy in Southeast Asia.
About 6.89 trillion baht ($ 221 billion) of Thailand’s outstanding debt – or 42% of total loans – have been subject to relief programs that include deferral and reduction of payments, reduction interest rates and restructuring.
The most important of them – a six-month government-imposed debt repayment holiday – ended Thursday.
The Bank of Thailand has said it does not expect sudden and significant defaults, but its former chief Veerathai Santiprabhob, whose term ended last month, warned in August that bad debts could rise. as the economy collapses.
Bangkok Commercial Asset Management, the country’s largest troubled debt manager BAM.BK, told Reuters it will spend 12 billion baht to acquire bad loans with a face value of around 40 billion baht this year.
“We will focus on buying debt this year and next year,” Bunyong Visatemongkolchai, chairman of the bank’s board of directors, said, adding that he planned to issue 25 billion baht of bonds for finance purchases.
Its shares are up 11% this year, compared to a 23% drop for the main stock index .SETI.
Easy credit for consumers and businesses has for years sparked many warnings about the dangers of household debt malaise in Thailand. These are now proving to be premonitory as the pandemic hits businesses, leaving up to three million people out of work.
Thai household debt is among the highest in Asia, at 83.8% of GDP in June, the highest level since 2003, as central bank predicts economy dependent on trade and tourism could shrink a record 7.8% this year.
Months of protests against the government and the monarchy could further slow the economic recovery.
For a graph on Thailand’s economy and tourism:
Thailand’s non-performing loans stood at 509 billion baht in June, a nine-year high of 3.09% of total loans, up from 2.98% at the end of 2019. Loans with a significant increase of credit risk reached 7.48% of loans, up from 2.79% at the end of last year.
Banks prefer to keep distressed assets in-house to avoid costly write-downs, but sometimes see no choice but to sell.
For a chart on bad debts in Thai banks:
“We will sell the debt of companies that have no potential,” said Atipat Asawachinda, senior senior vice president of Kasikornbank KBANK.BK, which plans to get rid of 10 billion baht of bad debt this year.
JMT Network Services JMT.BK, the biggest buyer of distressed consumer loans, will spend a record 6 billion baht to buy debt this year, CEO Sutthirak Traichira-aporn said.
“The amount of debt sold in the market is so large that we don’t have time to choose,” he said, noting that he had acquired debt with a face value of 12 billion baht. with an average discount of 84% in the first semester. .
JMT shares have jumped 66% this year.
Sutthirak said the relief measures had only delayed the degradation of the loans, comparing them to a water reservoir behind a dam: “If there is too much, it will burst.”
Reporting by Orathai Sriring and Satawasin Staporncharnchai; Additional reporting by Sumeet Chatterjee in Hong Kong; Editing by Ed Davies and Edwina Gibbs