Coronavirus: Thai Airways steps closer to restructuring in bankruptcy court

A Thai Airways aircraft parked on the tarmac at Suvarnabhumi Airport in Bangkok, on March 25, 2020. PHOTO: AFP

BANGKOK (BLOOMBERG, REUTERS) - Flag carrier Thai Airways International is a step closer to restructuring via a bankruptcy court after a key government panel backed the plan, which is due for consideration by the Cabinet on Tuesday.

A committee that oversees policies for state enterprises agreed the airline should seek such a rehabilitation, government spokeswoman Narumon Pinyosinwat told reporters in Bangkok on Monday (May 18). Restructuring via a bankruptcy court is not the same thing as filing for bankruptcy and being wound up, she said.

"The committee agreed in principle for Thai Airways to enter the rehabilitation process," she said.

The procedure replaces a previous rescue plan, which involved the airline seeking a 58.1 billion baht (S$2.59 billion) loan guaranteed by the government to ensure liquidity and help it through the outbreak of the new coronavirus.

In a statement responding to a local news report, the carrier on Monday denied that a board meeting on May 15 passed a resolution to file for bankruptcy. The company's reform plan was approved by its board on April 17, presented to the state enterprises office on April 29, and will soon be presented to the Cabinet "for further action," according to the statement.

Governments worldwide have devoted more than US$85 billion (S$121 billion) to propping up airlines after the coronavirus pandemic wiped out travel demand and grounded fleets. Thailand's borders are restricted under a state of emergency through May and most inbound international flights are banned until the end of June, though some domestic flights have restarted.

Thai Airways, majority owned by the Finance Ministry, has outstanding debt of about 92 billion baht, of which approximately 78 per cent is owed to bond investors, according to data compiled by Bloomberg.

Tris Rating Co, which is partly owned by S&P Global Ratings, has downgraded its rating on Thai Airways and the carrier's senior unsecured bonds to BBB from A.

"Holders of Thai Airways' bonds are watching closely for details of its rehabilitation plan," Thiti Tantikulanan, senior executive vice-president of Kasikornbank, said at a seminar. "The impact on the overall bond market will be limited because Thai Air bonds have been mostly sold to a limited group of investors."

Thai Airways has posted annual losses almost every year since the start of 2013. The flag carrier was under pressure to turn around its performance even before the Covid-19 outbreak.

Shares in the carrier slid as much as 15 per cent on Monday to the lowest level in more than a month. The stock has tumbled more than 90 per cent from a peak in 1999.

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