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Thailand in Focus Restructuring Services Insights | Q3-2020 Restructuring Services Insights | Thailand in Focus 1
Introduction
Notwithstanding a relatively low number of confirmed Covid-19 cases, the impact of Covid-19 on
Thai businesses has been acute and has been magnified by Thailand’s economic dependence on
tourism as well as globally integrated value chains. In this edition of Restructuring Services
Insights we take a closer look at the Thai economy and markets as well as the impact of Covid-
19 on three key sectors; automotive, aviation and tourism.
Report Contents
Page
Covid-19 Update for Southeast Asia 3
Thai Macroeconomic Indicators 4
Thai Equity Markets Update 5
Automotive in Focus 6
Aviation in Focus 7
Tourism in Focus 8
Thai Government Stimulus 9
Recovering from Covid-19 10
Business Rehabilitation in Thailand 11
About Deloitte Restructuring Services 12
Our Expert Restructuring Partners 13
Meet our new Thai Restructuring Partner
Kamolwan Chunhagsikarn
Value Creation & Restructuring Services
T: +66 2034 0162
E: kchunhagsikarn@deloitte.com
With more than 20 years’ experience in advisory services,
Kamolwan specialises in restructuring and value creation
services. Kamolwan has led several major projects involving
debt restructuring, refinancing, turnaround, distressed M&A
and formal insolvency administration by working alongside
lenders, stakeholders and corporate management to deliver
solutions in underperforming, stressed and distressed
operating environments.
Restructuring Services Insights | Thailand in Focus 2Covid-19 Update
Despite a recent surge in reported Covid-19 cases in Southeast Asia, the pandemic appears to
have been relatively well controlled in Thailand which represents a small percentage of cases
when compared to neighbouring countries. Notwithstanding the low infection rate, the economic
impact is expected to be significant given the substantial contribution of tourism “exports” to the
Thai economy (together with associated pull through revenue for the adjacent service and
consumer industries).
Cumulative reported COVID-19 cases, Southeast Asia (as of 27 July 2020)
300,000 1.6
1.4
250,000
% Global Confirmed Cases
1.2
200,000
1.0
No. Cases
150,000 0.8
0.6
100,000
0.4
50,000
0.2
0,000 0.0
13- 10- 2- 23- 13- 4- 25- 15- 6-
Jan Feb Mar Mar Apr May May Jun Jul
Indonesia Singapore Thailand Myanmar Brunei
Philippines Malaysia Vietnam Cambodia Laos
New COVID-19 cases SEA (3 days moving average)
3,000
2,500
2,000
No. Cases
1,500
1,000
500
0
31- 31- 29- 31- 30- 31- 30- 28-
Dec Jan Feb Mar Apr May Jun Jul
Indonesia Singapore Thailand Myanmar Brunei
Philippines Malaysia Vietnam Cambodia Laos
Sources: World Health Organization, Our World Data, Deloitte Research and Analysis
Restructuring Services Insights | Thailand in Focus 3Thailand in Focus | Macroeconomic Indicators
Thailand is the 2nd largest economy in Southeast Asia. Tourism is a key driver of GDP and as a
result of Covid-19 the Bank of Thailand expects GDP to contract 8.1% in 2020. Employment in
the tourism industry accounts for almost 22% of total employment in Thailand and economists
predict there will be a sharp rise in unemployment. The Thai Current Account Balance dropped
sharply in 2020 as global lockdowns and supply chain disruptions cause exports to fall sharply.
The Thai Government has announced various fiscal stimulus and eased interest rates in response
to growing concerns.
Gross Domestic Product Unemployment Rate
-8% +2.1%
550 3.5%
500
3.0%
450
400 2.5%
350
USD’b
300 2.0%
250 1.5%
200
150 1.0%
100
0.5%
50
0 0.0%
2015 2016 2017 2018 2019 2020F 2015 2016 2017 2018 2019 2020F
Exchange Rate (THB:USD) Current Account Balance
36 -12% 45
35 40
34
35
33
30
THB to USD1
32 -53%
USD’b
31 25
30 20
29 15
10
2
1 5
0 0
2015 2016 2017 2018 2019 2020F 2015 2016 2017 2018 2019 2020F
Interest Rates (BIBOR) Non-Performing Loans (% of total)
5.0% -27% 4%
4.5% 4.1
4.0% 3.0 3.1 3.1 3.0 3.1
3%
3.5% 2.7
3.0
3.0% 2.3 2.3
2.5% 2%
2.0%
1.5%
1%
1.0%
0.5%
0.0% 0%
2015 2016 2017 2018 2019 2020F 2013 2014 2015 2016 2017 2018 2019 Q1-20
Source: The World Bank, Bank of Thailand, Economist Intelligence Unit, Bloomberg, CGS-CIMB, Deloitte Research and Analysis
Restructuring Services Insights | Thailand in Focus 4Thailand in Focus | Equity Markets
A majority of industries experienced a cumulative decline in market capitalisation in the 12
months to 30 June 2020 (with the SET plunging 16% in the first 6 months of 2020). As
expected, the Thai aviation sector was among the hardest hit industries with a ~55% decline in
market capitalisation and a 60% decline in EBITDA largely driven by Covid-19 travel restrictions.
Conversely, the Thai agricultural sector performed well with earnings improvements driven by
higher crop yields and improving rice prices.
Debt Radar: SET Market Scan as at 30 June 2020
FMCG
Telecommunication
Real Estate
Construction
Steel
Construction Materials
Industry Debt
USD1.7b USD34b
Source: S&P CapIQ, Deloitte Research and Analysis
Restructuring Services Insights | Thailand in Focus 5Automotive in Focus
Thailand has the largest automotive manufacturing industry in Southeast Asia. Virtually all of the
world's leading automakers, assemblers and component manufacturers have an established
presence in Thailand. Covid-19 shocks to the automotive industry are expected to be more
severe than the 2008/2009 global financial crisis. Although positive signs have emerged in
China, where demand is recovering as the economy emerges from lockdown, recovery in other
key Western demand markets may be delayed due to local restrictions and recession
uncertainties, with consumer discretionary spending on automotive expected to remain weak.
Global Light Vehicle Sales
100 95 Covid-19 impact 20% • Sales: Global light vehicle sales
90 89
89.7 85-88 expected to be down by 22% in
Global sales, m 80
Vehicle units (millions)
90
72
% change
10% 2020. This compares to an 8%
11.3%
decline during the 2008/09 crisis.
Annual change
78
80 0%
• Production: Global light vehicle
70.1
70 -4.0% -10%
production is also expected to fall
23%. However, several
60 -20%
automakers are moving into
recovery mode. Component
-21.9% supply will influence production.
50 -30%
2019 2020F 2021F • Public transport: Expected
consumer shift towards individual
mobility from public transport
Consumer Sentiment due to health concerns.
“I’m planning to keep my current
80%
vehicle longer than I was originally • Dealers: Impacted by lock-
70% expecting” (% agree) downs and social distancing,
60%
dealerships are struggling to
move target order quantities and
50%
are announcing major staff
40% Simplify – message ~50% of consumers reductions.
planning delayed auto purchases
30% • Supply chains: Reduced
20% volumes have led to suppliers
increasing component prices,
10%
further adding to financial
0% pressures on the cash strained
IN CL PL CN MX IE ES KR JP AU IT FR US CA UK BE DE NL
supply chains for manufacturers
Note: percentage of respondents who said ‘agree’ or ‘strongly agree’
which are running production
lines at lower speeds to allow
physical distancing by factory
Supplier Financial Health Analysis of 63 automotive suppliers workers. OEMs are taking
Liquidity increasing steps to identify and
8.6
Cash & Cash Eq./ Assets (%) 0.5
39.4
39.0
address supplier resilience risks.
Cash Conversion cycle (42.6) 165.9
1.5
Current Ratio 0.7 5.5
Financial Leverage
79.2
Debt / Equity (%) 0.6 411.4
Interest Coverage 12.5
0.9 174.5
(EBITDA Interest Exp.)
Operating Performance
2.7
3 Year Revenue CAGR (%) (15.8) 34.5
84.3
COGS / Sales (%) 48.3 95.2
7.9
SGA / Sales (%) 2.9 28.6
5.8
EBIT Margin (%) (2.7) 33.5
Industry Median
Sources: IHS Automotive, Reuters, Financial TimesMoody’s forecasts, Financial times, Guardian, SMMT, 2020 Deloitte
Global Automotive Consumer Study, Deloitte Automotive Industry Research
Restructuring Services Insights | Thailand in Focus 6Aviation in Focus
Two major Thai airlines have filed for formal insolvency protection so far in 2020. Full year global
passenger demand is forecast to fall by 48% in 2020 from 2019 levels. Globally, airlines have
been forced to park over 17,000 passenger jets (around two thirds of all those in service) and to
cut large portions of the workforce as well as seek government bailouts (in some cases). Airlines
are seeking to cancel orders and deliveries are estimated to drop by 50% in 2020 YoY.
Global Air Passenger Volumes
1980 – Forecast 2020
5.0
4.5
Annual Passengers (billion)
4.0
3.5 9/11
Gulf War Global
3.0 II Financial
Asian
2.5 Financial SARS Crisis
2.0 Gulf war Crisis
I
1.5
1.0 Covid-19
0.5
0.0
1980 1985 1990 1995 2000 2005 2010 2015 2020
Market Capitalisation of Thai Aerospace Companies
Thai Airways Asia Aviation Bangkok Airways NOK Airlines
1,600
1,400 -30%
1,200
1,000
USD’m
800
600
400
200
0
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20
Aircraft Production schedule per model Airline Estimates on Industry Recovery
(per month 2020)
60
60 2021 2022 2023 2024+
50 Domestic / Short Haul
Pre Covid-19 Production
42
Revised Mid Covid-19 Production 40
40
31
30
20
14
10 International / Long Haul
10 6 6 7
5 5 5
2 3
0
A330 A360 777 787 A220 A320 737
-67% -40% -40% -50% - -33% -26%
Sources: Airbus, Financial times, Bloomberg, Reuters, Sky, Boeing, Planespotter, IATA
Restructuring Services Insights | Thailand in Focus 7Tourism in Focus
International tourists generated USD66bn in direct revenue in 2019. Thailand recorded zero
foreign tourist arrivals for the second straight month in May 2020 due to border closures.
According to studies done by Fitch, annual tourist arrivals are forecasted to drop to 16m in 2020
(a 58% reduction YoY). Beyond the aviation and hotel industries, Thailand’s economy is highly
dependent on tourism. The drop in Chinese tourist numbers from January to April 2020 alone
caused losses of over USD3 billion, according to Tourism Authority of Thailand (TAT).
Inbound Tourists to Thailand Occupancy Rate
4,000 70 -39.43%
No. of foreign arrivals TH (‘000s)
3,500 60
3,000
50
2,500
40
%
2,000 -100.00%
30 Occupany rate
1,500
20
1,000
500 10
0 0
Sep Nov Jan Mar May 2017 2018 2019 2020F
19 19 20 20 20
Traffic flow of Thai Airports International Tourism Receipts
40 70
35 60
30 -58.30% 50
Arrivals (000‘000s)
Inbound -62%
25
40
USD ‘b
Outbound
20 66
62 64
30
15
20
10
25
5 10
0 0
2017 2018 2019 2020F 2017 2018 2019 2020F
Market Capitalisation for Public Thai Hotel Companies
3,000 -26%
Central Plaza Hotel Pcl Laguna Resorts & Hotels Pcl Verdanda Resort Pcl Asia Hotel Pcl
2,500 Shangri-La Hotels Pcl S Hotels and Resorts Grande Asset Hotels Dunsit Thani Pcl
2,000
USD’m
1,500
1,000
500
0
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20
Sources: Tourism Authority of Thailand, Bank of Thailand, Fitch, Deloitte Research and Analysis
Restructuring Services Insights | Thailand in Focus 8Thai Government Stimulus
Like other countries, the Thai government is implementing both monetary and fiscal policies to
mitigate the impact of, and stimulate the economy during, the Covid-19 pandemic. The cabinet
has approved a three-phase Covid-19 relief and recovery package worth THB2.2t (USD70b /
12.9% of GDP) aiming to provide liquidity support for vulnerable households and businesses.
Summary of government stimulus packages
Monetary policy Support for individuals
• Policy rate slashed to a historic low at 0.5% • Reduced social security contributions
• FIDF rate cut from 0.46% to 0.23% of deposit • Water and electricity bill concessions
base
• 50% of salary as unemployment compensation
from Social Security Fund (SSF)
Tax reliefs • Cash hand-out to farmers, affected workers,
and part-time employees, not covered by SSF
• Filing deadline extension for several tax
payments • Emergency loan without collateral by
Government Saving Bank (GSB) and Bank for
• Reduction of withholding tax rate for 2020/21 Agriculture and Agricultural Cooperatives
• Expanded corporate income tax deductions for (BAAC) – THB 10,000 per person
interest expenses and wage expenses • Special loans with collateral by GSB –
• Expanded personal income tax deduction for THB50,000 per person
health insurance payments and super savings • Lower interest rate of 0.125% per month at
• Early tax refund/return State-owned pawnshops
• Customs and import duty exemption for all
imported products to fight against COVID-19 Support for businesses
• Tax exemptions/allowances for health workers • Soft loan by GSB
• Tax and fee exemption to support debt • Soft loan to promote employment by SSF
restructuring of non-financial creditors
• Soft loan by Small and Medium Enterprise
Development Bank (SMEB) to affected SMEs
Tourism stimulus campaign • Soft loan for SMEs by Bank of Thailand (BOT)
• Subsidies for 5m nights of hotel • Lower social security contribution
accommodation at 40% of normal room rates
(limited to THB3k per night for 5 nights) • Reducing and delaying service fees and rents
of State Properties
• Subsidies for other services, including food and
capped at THB600 per room per night • A moratorium on principal payment, interest
cuts and payment term extensions for debtors
• Subsidies for $40 of air ticket costs of Specialized Financial Institutions (SFIs)
• BOT’s easing of debt-classification criteria to
help affected debtors and give more flexibility
to banks to approve the loan
Illustrative Stimulus THB billion
Soft loans by GSB and SSF (phase 1) 180
Measures to assist people affected by COVID-19 (phase 1) 20
Recovery measures
Emergency loan without collateral (phase 2) 40 • Special Government Fund to support
healthcare and public health
Special loan with collateral (phase 2) 20
• Special Government Fund to support and
Loans by SMEB 10
strengthen the community’s economic activity,
MOF’s Decree to borrow to fund all relief cash transfers, 1,000 promote and stimulate private and household
medical response and economic and social rehabilitation consumption and private investment and
BOT’s Decree to provide soft loan to SMEs via commercial 500
invest in infrastructure at a community level
banks and SFIs
• Corporate Bond Liquidity Stabilisation Fund
BOT’s Decree to stabilize financial market by setting up BSF 400 (BSF) to invest in newly issued investment
grade private sector debt securities to redeem
the maturing securities
Sources: Ministry of Finance, Bank of Thailand, The World Bank
Restructuring Services Insights | Thailand in Focus 9Recovering From Covid-19
A comprehensive crisis management framework should include practical steps to ensure
protection of stakeholders, preservation of business continuity and preparation for the “new
normal” in the post Covid-19 world. We are actively helping businesses in Southeast Asia to
respond, recover and thrive through the operational and financial disruption caused by Covid-19.
A Phased Approach to Business Transformation for the “New Normal”
Protect People
01. • Implement comprehensive immediate as well as long term action plans to
protect key stakeholders, including employees, customers, partners, and
Protect the community.
People • Ensure Day 1 Command Centre brings together scenario planning, strategy,
end-to-end operations, execution.
Cash and Working
Capital Supply Chain Continuity
02. • How much liquidity does the
company need to restart?
• Assess supplier financial heath for
critical components
Preserve • Optimising current usage and • Scale up supplier risk function in
visibility purchasing, likely to be multiple
Business supplier failures, prepare options
Continuity • Financing as well as sources and
diversity of funding. Government • Systematic monitoring of
support incl. tax reliefs and inventory in the supply chain.
incentives Stagger production speed to fill
supply chain
• Covenant position with lenders,
how will they react, alternative • Ramp up production slowly to fill
lenders supply chain, focus on key SKUs /
high demand variants
• Options to raise external finance
(asset disposals, sale / lease back • Right size per strategy, swift
etc.) action
• Sequencing of funding sources
Strategic (Turnaround) Rightsizing and
Response Operations Optimisation
03. • Prepare a detailed approach to
transformation, including plans
• Dispose non-core operations and
assets
to: • Footprint and facilities review and
Prepare for implementation
− Navigate short-term operational
the “new and financial challenges • Re-evaluate/ effect make vs buy
normal” − Amend business objectives and
decisions
• Opportunistic acquisitions for
operating model to win in the seizing market opportunities and
future, making difficult decisions assets from troubled competitors
in an uncertain market
• Tactical acquisitions to manage
− Operate in “new normal” cash flows
environment with new • Delivery of cost and commercial
competitive dynamic synergies
− Fund strategic response
Restructuring Services Insights | Thailand in Focus 10Business Rehabilitation in Thailand
The formal Business Rehabilitation Process (“BRP”) was first introduced in Thailand in 1998 and
is widely used to solve situations when companies face financial challenges. The BRP provides
breathing space from creditors to allow a recovery plan to be developed and implemented to
improve stakeholder outcomes. The Covid-19 pandemic has brought the BRP back into the
spotlight with fourteen petitions filing with Thai’s Bankruptcy Court since March 2020 (including
two major airlines) indicating a level of stress not seen since the Asian Financial Crisis.
Key Features
• Automatic Stay: Upon the submission of • Voting: The rehabilitation plan must be
the petition and acceptance by the Court, approved by a special resolution of either i)
an automatic stay will come into effect and each class of creditors; or ii) at least one
serve as a temporary shield for debtor in class of creditors who carry not less than
order to maintain the ordinary business 50% of the total debt. The same voting
operations during the BRP. Conversely, as rules also apply to actions to approve
a protective measure for creditors, the stay revisions to the plan, remove the plan
imposes restrictions on the ability of the administrator, and / or to appoint a
debtor to dispose of, distribute, transfer or creditors’ committee for implementation of
the plan.
create any encumbrance over its assets or
to repay pre-BRP debts unless doing so • Priority Rescue Financing: Funding
would be a continuation of the ordinary advanced during the BRP is afforded a
course of business. priority over pre-BRP debts. This increases
the confidence of new financiers or
• Appointment of a Planner: Upon
investors injecting new money for
commencement of the BRP, the powers and
maintaining the going concern and for
duties of the debtor’s directors in managing
future growth.
the business as well as the legal rights of
shareholders (except the right to receive • Potential Future Cross Border
dividends) are vested in the newly Recognition: Thailand is not a party to an
appointed Planner and Plan Administrator. international treaty on insolvency or
The Planner has two main functions; rehabilitation of foreign judgements.
managing the business and preparing a However, the Legal Execution Department
rehabilitation plan. This introduces a under the Ministry of Justice is in the
restructuring professional to the situation to process of adding new provisions that are in
assist with rescuing the business. line with the UNCITRAL’s Model Law to
address such pending issues.
Overview of the BRP
Petition Court Planner
Court Court
is filed. orders submits Creditors’
Order is approves the
Rehab the Plan meeting to
announced Plan and
Court and to the consider
in Royal appoint Plan
accepts appoints official the Plan
Gazette. Administrator
petition. Planner. receiver.
Creditor can file an
objection at least three
days before preliminary
court hearing. Creditors submits the
claims within one month. Plan Administrator has a period of
five years to successfully
Automatic Stay comes implement the Plan. This period
into immediate effect once may be extended twice for
Planner prepares the Business Rehabilitation Plan within
the Rehabilitation Petition three months (two extensions of one month each are additional one-year term.
is accepted by the Court. possible)
Restructuring Services Insights | Thailand in Focus 11Deloitte Restructuring Services
We work with clients to improve outcomes across the stress spectrum ranging from companies
seeking to turnaround short term underperformance to those in deep financial distress requiring
crisis management. We are actively helping businesses around Southeast Asia (including in
Thailand) to turnaround, transform and grow their businesses even in the most challenging
circumstances.
Deloitte Restructuring Services
M&A Opportunity
Portfolio Lead
Advisory Services
Turnaround &
Value Creation
Accelerated M&A
Company performance/health
Special
Situations
Financial
Advisory
Restructuring
Advisory Distressed M&A
Contingency
Planning
Formal
Insolvency
Management Level of influence Creditors
Time
• Turnaround & Value Creation Services for underperforming businesses using M&A,
restructuring and private equity techniques to deliver performance improvement …fast
• Portfolio Lead Advisory Services deleveraging and loan portfolio sale transactions acting
sell-side / buy-side and providing strategic advisory to maximize value from non-core assets
• Financial Restructuring business reviews and options assessment to establish a foundation
to assist stakeholder negotiations in corporate refinancing, restructuring and M&A situations
• Special Situations Advisory accelerated capital raising, M&A, debt advisory and structuring
assistance in complex cross border multi-stakeholder special situations
• Contingency Planning before and during complex restructurings, supporting with options
analysis and “plan B” scenarios to drive a consensual deal or provide a bridge into insolvency
• Formal Insolvency where a consensual restructuring is not possible; we can provide
assistance to debtors and creditors through formal corporate insolvency processes
Restructuring Services Insights | Thailand in Focus 12Key Contacts
Andrew Grimmett Matt Becker
SEA Restructuring Leader SEA Turnaround Leader
T:+65 6530 5555 T: +65 8332 1977
E: agrimmett@deloitte.com E: mbecker@deloitte.com
Richmond Ang Kamolwan Chunhagsikarn (Minnie)
Debt Advisory and Restructuring Lead Value Creation & Restructuring Partner
T:+65 6216 3303 T: +66 2034 0162
E: rang@deloitte.com E: kchunhagsikarn@deloitte.com
Justin Lim Wei Cheong Tan
Restructuring Partner Restructuring Partner
T:+ 65 6216 3269 T:+65 6531 5046
E: juslim@deloitte.com E: wtan@deloitte.com
Siew Kiat Khoo Chi-Nang Kong
Malaysia Restructuring Leader Portfolio Lead Advisory Services Lead
T: +60 3 7610 8861 T: +65 6800 2270
E: skkhoo@deloitte.com E: cnkong@deloitte.com
Soo Earn Keoy Edy Wirawan
SEA Financial Advisory Leader Indonesia Financial Advisory Leader
T: +65 6216 3238 T: +62 21 5081 9200
E: skeoy@deloitte.com E: ewirawan@deloitte.com
Phong Le Aye Cho
Vietnam Financial Advisory Leader Myanmar Financial Advisory Leader
T: +84 28 3521 4080 T: +951 230 7365
E: phongle@deloitte.com E: aycho@deloitte.com
Global Contacts | Navigating the Financial Impact of Covid-19
Andrew Grimstone Jiak See Ng
Global Restructuring Services Leader APAC Financial Advisory Leader
T: +44 20 7007 2998 T: +65 6531 5088
E: agrimstone@deloitte.co.uk E: jsng@deloitte.com
Restructuring Services Insights | Thailand in Focus 13Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms and their affiliated entities are legally separate and independent entities. DTTL does not provide services toclients. Please see www.deloitte.com/about to learn more. Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax & legal and related services. Our global network of member firms and related entities in more than 150 countries and territories (collectively, the “Deloitte organisation”) serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 312,000 people make an impact that matters at www.deloitte.com. Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and their related entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region, including Auckland, Bangkok, Beijing, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Shanghai, Singapore, Sydney, Taipei, Tokyo and Yangon. © 2020 Deloitte Southeast Asia Ltd
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