Broad Thai debt framework accord endorsed<\/p>\n
BANGKOK (Reuters): Thai and foreign bank creditors on Thursday
\nendorsed a broad framework agreement aimed at nudging debt
\nrestructuring of the battered Thai corporate sector.<\/p>\n
Dozens of bankers and business executives gathered at a hotel
\nto lend support to the non-binding debt restructuring framework
\nworked out with the Board of Trade and the Federation of Thai
\nIndustries which represent major debt-ridden companies.<\/p>\n
Central bank governor Chatu Mongol Sonakul, chairing the
\nagreement signing, said he hoped the 19-point framework would
\ncreate a conducive environment for restructuring bank non-
\nperforming loans (NPLs).<\/p>\n
Analysts have said Thai banks carry NPLs estimated at 1.6-1.8
\ntrillion baht (US$39-44 billion) or about one third of their
\noutstanding loans. They expected the problem loans to peak at
\nover 40 percent in the first half of 1999 as the recession
\ndeepens.<\/p>\n
The Thai economy, facing its worst slump in half a century, is
\nprojected to contract at least seven percent in 1998.<\/p>\n
David Proctor, chairman of the Foreign Banks' Association,
\ntold the signing ceremony: \"This is the first time such an
\nundertaking has received such comprehensive support from all
\nsides...The crisis facing the worldwide markets can only be
\novercome if all parties concerned work together.\"<\/p>\n
Proctor said the framework requires troubled corporate debtors
\nto provide detailed financial information to creditors to ensure
\nthat proposed restructuring plans are viable.<\/p>\n
He said creditors, armed with full debtor information, were
\nurged by the agreement to \"standstill, meaning no acceleration of
\ndebt repayments and no charging of default interest\".<\/p>\n
The framework said any corporate debt restructuring should
\nachieve a business, rather than just a financial, adjustment to
\nfurther long term viability of the debtor.<\/p>\n
It said priority must be given to rehabilitate assets to
\nperforming status. The paper included a rough timetable for
\nrestructuring deals for completion within three to five months.<\/p>\n
Chatu Mongol said on Wednesday the Bank of Thailand would
\ninitially look into 20 major NPL cases, mostly involving multi-
\ncreditors, to try to speed up their restructuring.<\/p>\n
The governor said he would monitor problem loans related to
\nthe troubled Bangkok World Trade Center project and the
\nunfinished Baiyoke Tower in Bangkok's central shopping district.<\/p>\n
His deputy Kitti Patpong-pibul told reporters he would seek a
\nsolution to problem loans generated by Thai Petrochemical
\nIndustry Plc. He said TPI has total debt of $3.8 billion.<\/p>\n
Banthoon Lamsam, chairman of the Thai Bankers' Association,
\ntold the signing ceremony bank creditors should not use debt
\nrestructuring as an excuse for circumventing accounting rules.<\/p>\n
Chatu Mongol said earlier that private bank creditors would be
\nleft to negotiate voluntary debt restructuring deals with
\nclients.<\/p>\n
He said the government did not impose arbitrary decisions on
\nthe private sector although Thailand's economic reform program
\nendorsed by the International Monetary Fund left open possibility
\nfor the authorities to intervene.<\/p>\n
The framework signed on Thursday said the state appointed
\nCorporate Debt Restructuring Advisory Committee \"may act as an
\nindependent intermediary...where cases are particularly difficult
\nor where other efforts have failed. The committee may well be a
\ncatalyst to activate sluggish negotiations\".<\/p>\n
\"I would be surprised on any central bank arbitrary role. The
\ncentral bank will apply influence where it can...but at the end
\nof the day, the private sector need to thrash out agreements by
\nitself,\" said Proctor.<\/p>\n
He welcomed a stipulation in the paper on equitable sharing of
\nlosses arising from debt restructuring. It said losses would be
\napportioned to reflect the legal standing of parties involved
\nwith equity holders taking the first hit before debt providers.<\/p>\n
The Thai government has encouraged early corporate debt
\nrestructuring by providing tax incentives for such deals and by
\noffering to help cooperative but cash-strapped banks raise
\ncapital.<\/p>",
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