Creditors of Thai Airways International (THAI), especially Bangkok Bank (BBL) and Krungthai Bank (KTB), will receive a boost from the national carrier's planned exit from its rehabilitation plan in mid-2025 as the banks are being given multiple options for debt repayment, analysts say.
In its recent filings to the Stock Exchange of Thailand (SET) and the Securities and Exchange Commission, management expects THAI shareholder equity to turn positive in February next year, then it plans to prepare to exit the rehabilitation plan in April.
The Central Bankruptcy Court is expected to approve its exit from the rehabilitation plan in May and the carrier's shares would then be able to resume trading on the SET by the end of June.
According to Chalie Kueyen, a banking analyst at KGI Securities (Thailand), BBL and KTB are listed among 36 groups with outstanding debt of 404 billion baht.
The banks are classified in the majority debtor group (Group 6) with outstanding debts of around 31 billion baht.
This group is classified as unsecured debt, and KGI believes both BBL and KTB have set aside some provisioning expenses for their lending exposure since THAI filed the restructuring plan in 2020.
"We learned in our talks with THAI's management that the debt to banks has been serviced regularly since the rehabilitation plan was set up five years ago with an undisclosed lending rate," he said.
According to THAI's exit rehabilitation plan, some debtors including financial institutions, bondholders, the Ministry of Finance and state enterprises, are required to convert debt into equity as a mandatory conversion and voluntary conversion with a price of 2.54 baht per share.
Creditors in Group 6 are being offered multiple options to receive repayment of debt, including the conversion of debt into equity and an extension to the payment period by up to 15 years with an interest rate of 1.5%, he said.
THAI will undergo capital restructuring in this year's fourth quarter as part of the business rehabilitation plan ordered by the court, in which 9.8 billion new shares would be issued to support the debt-to-equity conversion, said Weerapat Wonk-Urai, bank analyst at CGS International Securities.
A share offering would be offered to THAI's existing shareholders, employees and investors via private placement. After that, it will reduce the par value to wipe out accumulated losses, he said.
BBL and KTB have 11.9-billion-baht and 5.8-billion-baht loan exposure to THAI, respectively.
BBL's ownership in the carrier will rise from 0.4% in the second quarter of 2024 to 5.8% following the debt-to-equity conversion, he said.
"We believe both banks have classified loans to THAI as non-performing loans [NPLs]. If THAI's loans are upgraded to performing loans, we expect BBL's NPL ratio to decline from 3.64% as of the second quarter of 2024 to 3.18% and its NPL coverage ratio to increase from 283% to 321%."
Meanwhile, KTB's NPL ratio is forecast to drop from 3.85% to 3.59% and its NPL coverage ratio to rise from 181% to 192%, Mr Weerapat added.