Just three months after Thailand threw an $ 11 billion lifeline to businesses struggling to survive the pandemic, a descendant of the country’s richest business dynasty is betting the bailout won’t be enough to stem a deluge of troubled assets.

Schwin Chiaravanont – including the family controls the centenary Charoen Pokphand Group – plans to raise $ 500 million for its flagship private equity firm 9 Basil, which aims to use most of the new money to step up purchases of distressed assets. The fund is positioning itself to profit from bad loans which have soared from a 16-year high as Southeast Asia’s second-largest economy faces its worst recession since the Asian crisis of the late 1990s.

“The policies regarding dealing with troubled debt are unsustainable,” Schwin, 29, said in a telephone interview last week. “The question is more ‘when’ than ‘if’ there will be a lot of distressed debt flooding the market.”

The grandson of CP group co-vice chairman Wallop Chiaravanont doubles his bad loans when stimulus packages around the world help companies weather the crisis and reduce the distressed asset pool. Even Thai lenders are cutting sales: last month, Bangkok Commercial Asset Management Pcl – the country’s largest manager – said it only managed to buy 500 million baht ($ 15.6 million) in bad debt this year, well below its 2021 target of 9 billion baht.

As a slow vaccination campaign, more virulent strains of coronavirus and clusters of outbreaks hamper plans to opening up the $ 544 billion economy, Schwin is betting on delays for a speedy recovery from the devastation. Countless factories, hotels, restaurants and retailers have closed their doors. NPLs from all Thai lenders have jumped 15% since late 2019 to 537 billion baht, the highest since 2005, according to Bank of Thailand The data.

The asset quality outlook for banks in most Southeast Asian markets will remain murky through 2022, as extended loan relief plans are expected to keep credit costs high in the near term, Fitch said. Ratings on June 25. Credit costs may take longer to normalize in markets where relief has been strong but the economic outlook remains under pressure, such as in Malaysia and Thailand, Fitch said.

While Rathanon Fookiat, manager at Bangkok Commercial Asset Management, echoed Schwin’s views on the likelihood of more distressed assets coming into the market, he cautioned investors against rushing.

Increase in bad debts

Thailand’s non-performing loans surged amid novel coronavirus pandemic

Source: Bank of Thailand

“The current economic crisis will increase the supply of distressed loans and assets offered for sale by banks,” Rathanon said last month. “Nonetheless, caution should be exercised when rushing to buy these assets, as prices could fall further with a possible worsening of the pandemic. “

9 Basil more than doubled the value of its assets by betting on rural-focused micro-lenders Ngern Tid Lor Pcl, who raised 33 billion baht in April in an initial public offering, Schwin said. The fund now owns 5% of the company, he said, which has a current market value of around $ 2.9 billion.

Most of the new funds raised by 9 Basil will be used to increase the ailing asset manager’s holdings Alpha Capital Asset Management Co., of which 9 Basil owns 49%, he said. Alpha Capital is planning a listing next year.

Red ocean

“The struggling asset sector is a red ocean and would be difficult for any newcomer,” said Bunyong Visatemongkolchai, executive chairman of Bangkok Commercial Asset Management. “The competition is very intense. You have to bid at high prices, while the risks of collecting debts or selling those assets are also very high. “

After earning a master’s degree in commerce from the University of North Carolina at Chapel Hill in 2014, Schwin worked in his family office before venturing into two startups that later failed. His family fortune is estimated at $ 32 billion, according to Bloomberg News report in November.

Despite being new to managing troubled assets – a career move out of the shadows of his clan’s business empire – Schwin said he would draw inspiration from his own family’s experiences in the 1990s. During the Asian financial crisis, the CP group had to give up certain parts at discounted prices to stay afloat. While it has survived – and has since prospered – many other Thai businesses and banks have collapsed.

“Managing distressed assets is an industry that is doing very well in most economic cycles,” said Schwin. “Despite last year’s slowdown due to political pressure, we have more than doubled the size of our portfolio over the past 12 months through new portfolio acquisitions and secondary portfolio acquisitions.”


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