wordchild

This issue could become even more toxic for the Thai Government if there is any suggestion or suspicion that there has been any difference in the treatment of Thai entity creditors vs the international creditors. Or, if the principals of creditor hierarchy are not strictly applied eg if lower ranking (eg Thai) creditors take any kind precedence (or get any kind of special treatment or favor) over other ( lets say international) creditors. This will all have to be conducted under the glare of international scrutiny. And the legal process will not be fully under Thai Govt control. Not something this Government will be particularly comfortable with, I suspect.

The " smoke and mirrors" is in the way the story has been spun. Also in the device of using what is effectively a Government controlled fund, to reduce the Thai Govt shareholding to under the 50% threshold, and so passing on (knowingly) to that fund's holders a piece of a (likely) worthless asset. In doing this they have neatly hung the Thai Airways bond holders out to dry. These include many Thai employment provident funds and co-ops who bought the bonds on the assumption that Thai Air was subject to a state guarantee, and so backed by the full faith and credit of the Thai Govt. The Rating Agency also assumed this which is why, prior to this week, these bonds had high Investment grade ratings, there was a presumption of Thai Government backing. In the past both Thai Air and the Thai Govt were able to make use of this presumption of state backing to fund the airline at a significantly lower cost than would have otherwise been available to it. The shares are likely to be suspended at some point and they are (i guess) of zero value and the bond holders will likely have their coupons suspended and be subject to capital loss. The International creditors will recruit armies of lawyers. The behavior of the Thai Government will be the subject of some future scrutiny, i would think.

it is very much smoke and mirrors, but , at some point, as the smoke clears, Thailand's financial reputation and standing in the world is going to take something of a dive. As others have pointed out, it is just not possible to separate out Thai Air from the Thai Government. Now they are trying to wash their hands of it.

the shares are not the issue. the whole company has a stock market value of less than 300 million USD, and most of the stock is held by the Government or quasi govt entities anyway. The issue is the debt 5 billion plus USD, and the question of who owns that debt and who will have to take the losses as chunks of it are written off. Much of the senior level debt is owed to (effectively) Govt controlled banks. But there is also a considerable amount of debenture debt which is in the hands of Thai individuals and a variety of savings co-operatives and certain corporate employee benefit funds/trusts. Some of these small savings institutions have significant positions in these debentures because, in the past, Thai was seen as a safe company and with Government backing. As debenture holders they would rank behind the Government banks in any re structuring. In the end the Government will have to make some tough calls as to how the pain is going to be shared out, but the debenture owners and the various small co-ops involved look likely to suffer significant losses.