BANGKOK: Just three months after Thailand threw a US$11bil (RM45.70bil) lifeline to businesses struggling to survive the pandemic, a scion of the nation’s wealthiest business dynasty is betting the bailout won’t be enough to stanch a deluge of distressed assets.
Schwin Chiaravanont – whose family controls the 100-year-old Charoen Pokphand (CP) Group – is planning to raise US$500mil (RM2.08bil) for his flagship private-equity venture 9 Basil, which aims to use most of the new money to step up purchases of distressed assets.
The fund is positioning itself to benefit from bad loans soaring from a 16-year high as South-East Asia’s second-largest economy battles its worst recession since the Asian crisis of the late 1990s.
“Policies around distressed debt management are unsustainable,” Schwin, 29, said in a phone interview last week.
“The question is more ‘when’ than ‘if’ there will be a lot of distressed debt that floods the market.”
The grandson of CP Group’s co-vice-chairman Wallop Chiaravanont is doubling down on soured loans when stimulus packages around the world help companies weather the slump and shrink the pool of distressed assets.
Even Thai lenders are scaling back sales. Last month, Bangkok Commercial Asset Management Pcl – the nation’s biggest manager – said it managed to buy only 500 million baht (US$15.6mil or RM64.81mil) of bad debt this year, well short of its 2021 target of nine billion baht (RM1.16bil).
As a slow vaccination drive, more virulent coronavirus strains and clusters of outbreaks hinder plans to throw open the US$544bil (RM2.26 trillion) economy, Schwin is betting on delays to a quick recovery from the devastation.
Countless factories, hotels, restaurants and retailers have shut down.
Non-performing loans at all Thai lenders jumped 15% since end-2019 to 537 billion baht (RM69.5bil), the most since 2005, according to Bank of Thailand data.
Asset quality outlook across banks in most South-East Asian markets will remain clouded into 2022, as extended loan relief plans are likely to keep credit costs high in the near term, Fitch Ratings said June 25.
The normalisation of credit costs may take longer in markets where relief has been extensive but economic outlooks remain under pressure, such as in Malaysia and Thailand, Fitch said.
While Rathanon Fookiat, a manager at Bangkok Commercial Asset Management, has echoed Schwin’s views on the likelihood of more distressed assets coming to market, he warned investors against haste.
“The current economic crisis will increase the supply of distressed loans and assets being offered for sale by banks,” Rathanon said last month. — Bloomberg