Distressed Assets

Thailand – South East Asia’s second biggest economy saw surge in bad loans amid pandemic lead downturn of the economy which opened opportunity for distressed asset management firms in the country to go on a shopping spree. Currently the Thai economy has about 6.86 trillion baht of outstanding debt which roughly translates to 42% of total lending under the relief programs including payment deferment, interest rate reduction and debt restructuring. Also, the government mandated six months debt payment holiday ended last month. The Bank of Thailand does not expect a large default, however former governor Veerthai Santiprabhob earlier warned there could be sudden jump in bad loans as economic recovery slumps. Thailand holds the highest household debt in the region at 83.8% of GDP as of June, according to Reuters. Non-performing loans accounts to 509 billion baht as of June which is at nine years high of 3.09% of the country’s total loan portfolio, as reported by Reuters. Loans with significant credit risks is at 7.48% of lending which is an increase of 2.79% compared to end of last year. According to Reuters report, Atipat Asawachinda- first senior vice president of Kasikornbank noted the bank plans to sell 10 billion baht of bad debt this year. Bangkok Commercial Asset Management (BAM), country’s largest distressed debt manager earlier told Reuters it plans to acquire bad loans worth 12 billion baht with face value of about 40 billion baht this year. The company plans to issue bond worth 25 billion baht to fund these massive scale purchase. BAM is currently trading at 18.80 baht which according to Kasikorn Securitie's model is trading at 40% discount with target price at 22.00 baht.