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UPDATE 1-Thai court approves $1.9 bln debt restructuring of steelmaker SSI
December 16, 2016 / 6:47 AM / a year ago

UPDATE 1-Thai court approves $1.9 bln debt restructuring of steelmaker SSI

* Total debt claim on SSI including interest is 69.2 bln baht-SSI

* Banks expect court move to improve their financial position

* SSI hit by weak domestic steel demand, China oversupply

By Manunphattr Dhanananphorn

BANGKOK, Dec 16 (Reuters) - A Thailand bankruptcy court has approved a $1.94 billion debt-restructuring plan for the nation’s biggest steelmaker, Sahaviriya Steel Industries Pcl (SSI), a move that Thai lenders said would help them improve their finances.

Thailand’s Central Bankruptcy Court cleared the steelmaker to implement the restructuring plan after some 91.90 percent of its creditors voted in favour in September, SSI said in a statement on Thursday.

“Our financial position should improve because the loan loss coverage ratio is expected to rise after the court gave nod to SSI debt plan,” Kittiya Todhanakasem, chief financial officer at Siam Commercial Bank (SCB), told Reuters on Friday.

Loan loss coverage ratios measure banks’ ability to withstand future losses from bad loans, and are calculated using the provisions set aside for future losses and the total volume of non-performing loans (NPLs).

SCB’s coverage ratio was at 128.9 percent at the end of the third quarter.

Analysts expect SCB’s coverage ratio to rise to 159 percent after the SSI restructuring is completed.

SCB, Tisco Bank and Krung Thai Bank are three major SSI creditors which made syndicated loans to the steelmaker to acquire a British steel mill in early 2011. The combined exposure of the three lenders to SSI is 49 billion baht plus interest.

The Thai banking sector’s bad debt rose last year after money lent to SSI and its UK subsidiary was classified as NPLs, requiring lenders to set aside special loan loss provisions.

“NPLs of the bank industry should reduce. SSI debt restructuring should help improve the outlook of the overall sector, especially the bank’s creditors,” said Sakchai Peechapat, president of Tisco Bank.

The steelmaker became the country’s largest corporate debt defaulter since the 1997 Asian financial crisis after it shouldered losses from the UK subsidiary.

SSI UK went into liquidation in October 2015 after mothballing its Redcar plant in northeast England and cutting 1,700 jobs.

SSI, which has made losses since 2011, has been blighted by sluggish domestic demand and a weak global market as a result of oversupply from china.

The steelmaker said the total debt claim was 69.22 billion baht ($1.94 billion), including 5.3 billion baht interest, and the restructuring plan involved debt-to-equity conversions and debt repayment to 13 groups of creditors. ($1 = 35.7600 baht) (Reporting by Manunphattr Dhanananphorn; Writing by Khettiya Jittapong; Editing by Keith Weir and Muralikumar Anantharaman)

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