The Ministry of Finance is preparing to convert the debt of Thai Airways International into equity, with a proposal expected to be submitted to the cabinet this month as part of a plan to increase the company’s capital.
As a major creditor and a shareholder with a 40% stake, the ministry is prepared to exercise its right to convert 100% of the debt the airline owes it into shares, said Tibordee Wattanakul, director-general of the State Enterprise Policy Office.
The total debt amounts to 70 billion to 80 billion baht, originating from liabilities accumulated by the national carrier since 2020.
According to the airline’s rehabilitation plan, creditors are required to convert 24.5% of their debt into equity, while the remaining 75.5% is subject to their discretion.
The ministry said it agreed to a full equity conversion because the airline’s financial performance has been improving steadily.
Once THAI resumes trading on the Stock Exchange of Thailand (SET), creditors can sell their shares following a one-year holding period. Alternatively, if creditors opt to wait for debt repayment, the process could take 11 or 12 years.
"The advantage of converting debt into equity is that after a one-year holding period, if the stock price improves we can sell the shares to recover funds," said Mr Tibordee.
"Waiting for debt repayment could take a long time, even though it comes with an interest rate 1.5% higher than the value of the debt."
He said he expected some other creditors to choose equity conversion, although the exact proportions remain unknown at this stage.
Creditors must provide notification of their decision before Nov 21. THAI is required to disclose the debt-to-equity conversion details to shareholders, enabling them to assess how much capital they wish to contribute in order to maintain their shareholding proportion.
The national carrier is also required to announce the share price for the capital increase to shareholders on Dec 2.
The Ministry of Finance plans to review the details of creditors’ debt-to-equity conversions and the proposed share price to determine the amount of funds it needs to allocate to maintain its shareholding, said Mr Tibordee.
In principle, the ministry does not intend to hold a larger share in THAI to avoid it reverting to state enterprise status, he said. However, the ministry aims to maintain a stake slightly higher than 40% to retain its management power, said Mr Tibordee.
The ministry plans to propose the capital increase to the cabinet for approval this month to meet the Dec 11 deadline for the capital injection.
The airline is currently reviewing its financial performance to ensure its readiness to exit rehabilitation, expected by February 2025, and to resume trading on the stock exchange around May 2025.
