THAI upbeat on creditors backing plan for early exit from rehabilitation
Thai Airways International (THAI) is confident that its creditors will approve its revised rehabilitation plan during a meeting on Thursday.
As part of the revised plan, the THAI would allow current shareholders to buy more shares at 2.54 baht per share. The national flag carrier expects to raise at least 25 billion baht from the rights issue, the chairman of the THAI committee overseeing the airline's rehabilitation plan said.
Thai Airways filed for bankruptcy protection in May 2020 after being saddled with massive debt and the worldwide travel downturn. In September 2020, the Central Bankruptcy Court in Bangkok ordered the airline into a business rehabilitation programme.
The committee’s chairman, Piyasvasti Amranand, said his panel would request approval from the creditors on Thursday after the committee submitted its revised plan to the foreclosure officials on July 1.
Piyasvasti said he was confident that the creditors would approve the revised plan because THAI has already been holding informal discussions with major shareholders, including the Finance Ministry, creditors who had bought corporate bonds, and financial institutions.
“I’m confident the creditors will vote in support of this plan because the rehabilitation committee has been holding talks with the creditors committee all along,” he said.
He said representatives of the Finance Ministry, two banks and savings cooperatives on the creditors’ panel had expressed support for the revised plan.
He said all the groups had expressed their willingness to support the revised plan so that THAI’s equity would turn positive in 2024 and the creditors, especially buyers of corporate bonds, would be paid back their loans sooner than scheduled by the initial rehabilitation plan.
Piyasvasti added that the revised plan would allow THAI to exit rehabilitation and it could resume trading of its shares on the stock exchange in 2025.
Piyasvasti said the revised plan would benefit current shareholders because THAI had not used the conventional method of reducing the par value of each share from 10 baht to one satang.
“But THAI will issue new shares to the creditors and shareholders at the price of 2.54 baht per share while the initial plan did not attach importance to the current shareholders,” he added.
He said the revised plan has three major steps:
- THAI would not return to the status of a state enterprise because the airline could not operate efficiently as a state firm in a highly competitive business.
- Convert debt into equity
- Issue new shares
He said the committee is confident that the Finance Ministry would agree to convert its entire loan into equity and would use its current shareholder’s right to buy more shares.
After the debt-to-equity conversion and subscription to the rights issue, the Finance Ministry would hold about a 32 per cent stake in THAI.
Adding the equities of state firms, such as Government Savings Bank and Krung Thai Bank, the state would hold about a 40 per cent stake in THAI, Piyasvasti added.
Once the revised plan is approved by the creditors and the Central Bankruptcy Court, THAI would issue new shares and convert its debt into equity, after which THAI would aim to have positive shareholders’ equity in late 2024.
He said if THAI achieves earnings before interest, tax, depreciation, and amortization (EBITDA) of over 20 billion baht a year as planned, it would be able to exit the rehabilitation process in 2025 and resume share trading.
Piyasvasti said THAI has seen an improvement in its performance after Thailand and other countries reopened post the Covid pandemic. THAI’s average cargo load increased from 10-20 per cent last year to 50 per cent in July and 80 per cent in August.
He said the number of passengers also increased from an average of 500 passengers per day during the first six months of this year to about 16,000 in July and 20,000 in August, which included 3,000 daily passengers of Thai Smiles.
In July, THAI earned revenue of 9.6 billion baht from cargo shipment and passenger transport while its subsidiary Thai Smile earned 1 billion baht.
He said THAI had EBITDA of 168 million baht after deducting plane rental fee during the second quarter.
During the high season this year, THAI would resume its Bangkok-Milan and Bangkok-Oslo routes late this year or early next year, Piyasvasti said. It would also increase Bangkok-Jeddah flights from four per week to seven.
He added that THAI would also hire 600 more outsourced employees within this year, adding to the current workforce of 14,400. THAI also plans to rent three more planes for routes to China, adding to its current fleet of 68 planes.
Meanwhile, the Federation of Savings and Credit Cooperatives of Thailand issued a statement to its members, asking them to vote in support of the revised plan on Thursday.
Wisit Srisuwan, director-general of the Cooperative Promotion Department, said the law did not allow the national cooperatives development committee to convert debt into shares, but the committee would follow orders if the bankruptcy court allows creditors to convert debt into equity.
Also on Wednesday, Finance Minister Arkhom Termpittayapaisith expressed support for the debt conversion plan. He said the ministry would maintain its stake in THAI at not less than 40 per cent, including shares held by state banks and a state investment fund.
Arkhom said he was discussing with state banks to help buy more shares in THAI once new shares were issued.