Thai Petrochemical Industry: Negotiating Debt after the East Asian Crisis (A, B)

Authors: Henisz, Witold J.; Capur, Aneesha
Source: The Wharton School of the University of Pennsylvania
Year: 2006
Company Name: Thai Petrochemical Industry
Number of pages: 21, 9

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Abstract:

After the East Asian crisis in Thailand, Thai Petrochemical Industry (TPI), the largest petrochemical conglomerate in Southeast Asia, became the biggest delinquent debtor in the country with US$3.4 billion in loans (approximately 10 percent of the financial system’s total nonperforming loans) to over 140 creditors.

In March 2000, in response to a petition led by Bangkok Bank along with TPI’s other major creditors (International Finance Corporation, US Export and Import Bank, Citibank and Bank of America), Thailand’s Central Bankruptcy Court (CBC) found TPI to be insolvent. The court had yet to rule on a restructuring plan. The steering committee appointed by the creditors had nominated Effective Planner, a unit of the Australian firm Ferrier Hodgson, to oversee the rehabilitation of TPI. TPI CEO Prachai Leophairatana had first declared a moratorium on debt repayments, then tried to negotiate a restructuring deal with the creditors, and after the creditors went to court, lobbied aggressively to lead the company restructuring. Prachai’s actions, whether or not they were successful, were indicative of the immense influence the former senator had on his own company’s operations as well as within the economic and regulatory framework in Thailand.

TPI’s creditors now had to make a decision on how best to maximize the value of their outstanding loans. In order to do so, the creditors needed to take into account the economy in Thailand, most importantly, the factors leading to the crisis, the actions of the Thai government with the aid of the International Monetary Fund (IMF) to counter the crisis, and the outcomes of these actions. As importantly, the creditors would have to analyze the events leading to TPI’s current situation and the factors that impacted the success of the company in order to assess the viable options available to them moving forward.