One of the more interesting aspects of Thai Airways rehabilitation will be the issue of debt to equity conversions.
THAI's debt load is not sustainable. It was not profitable before Covid-19 hit and any restructuring will necessarily involve dealing with the debt burden.
In many of the larger past restructurings in Thailand, an informal rule applied - equity ranks somewhere above unsecured debt and often above secured debt. While contrary to Thai law, it is a principle adopted by numerous significant family-owned businesses.
In one meeting, a business owner tossed the keys to his steel mill across the table towards creditors seeking debt to equity conversions, simply saying much to their horror: "Ok, you run it then." They were probably the keys to one of his cars but the point was made.
THAI is controlled by the Thai Government. While the Finance Ministry recently reduced its stake so THAI was no longer a state enterprise, the shares were shuffled sideways to a government-related fund.
It is unlikely the Finance Ministry will agree to dilute its stake in THAI as part of the rehabilitation plan. THAI as a national airline will be seen as an important part of Thailand's image with the Government in firm control for better or worse.
October 2020
© PELEN 2020
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