ThaiBMA warns investors about corporate bonds as firms struggle amidst pandemic
The Thai Bond Market Association (ThaiBMA) is urging caution among investors considering corporate bonds due to ongoing challenges faced by several companies in the aftermath of the Covid-19 pandemic.
Ariya Tiranaprakit, ThaiBMA’s executive vice president, highlighted that three companies failed to meet debenture payments totalling 12.1 billion baht this year. Additionally, some firms struggled to adhere to corporate bond payment schedules but negotiated with bondholders for payment restructuring or interest rate adjustments.
Confidence in the debenture market has eroded throughout the year due to companies struggling to fulfil their debt obligations, aggravated by lingering unresolved issues from previous years.
According to ThaiBMA’s website data as of August 31 this year, seven firms have fallen behind on payment schedules for a total of 23 corporate bond tranches, representing over 19 billion baht.
These firms include Stark Corporation with nearly 9.2 billion baht across five bond tranches, All Inspire Development with 2.33 billion baht distributed across seven tranches, and JKN Global Group (JKN), which has acknowledged its inability to fully repay a 607 million baht tranche of bonds.
Other companies facing similar challenges include Asia Capital Group, Apex Development (APEX), Inter Far East Energy Corporation (IFEC), and Destination Resorts.
Ariya noted that several companies have struggled due to the prolonged Covid pandemic, leading to liquidity shortages. However, this doesn’t necessarily reflect their overall quality. She also mentioned that some companies dealing with debt repayment issues have been involved in accounting fraud.
Small and medium-sized firms issuing high-yield corporate bonds and debentures have found it challenging to attract investors, while bonds from large corporations like PTT, SCG, and major banks are gaining investor interest, Ariya says.
“We advise investors to meticulously scrutinise all information before making an investment decision. This includes not only whether the bonds are rated by rating agencies or not, but also the capacity of the bond issuers to generate sufficient cash flow for debt repayment.”
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