Major banks are preparing to allocate more than 10 billion baht in overall loan loss provisions for troubled Energy Absolute (EA) if the company encounters a cross-default situation, as outlined by UBS Securities (Thailand).
UBS projects the collective loan exposure to EA to reach approximately 32.1 billion baht, comprising 23.2 billion baht in long-term loans and 8.84 billion baht in short-term loans.
Should a cross-default arise, creditors would demand a total provision cost of 10.8 billion baht.
Cross-default, a stipulation in a bond contract or loan agreement, triggers a borrower’s default if they default on another obligation.
Per EA’s 2023 annual report, Siam Commercial Bank (SCB), Bank of Ayudhya (Krungsri), and Mizuho Bank Bangkok Branch are the primary financial institutions in contact with the company.
UBS anticipates significant creditors to support EA at both the parent company and subsidiary levels, extending prolonged corporate financial support and short-term working capital loans.
SCB and Krungsri’s loans are foreseen to represent a larger segment of each bank’s overall loan portfolio compared to their counterparts.
In this predicted scenario, UBS forecasts that SCB and Krungsri will entirely provision for the loan loss linked to EA’s electric vehicle bus and battery ventures, as well as 70% for short-term loans with meager collateral.
Nevertheless, the two aforementioned banks are expected to reserve lesser amounts for EA’s solar and wind power projects, at 20% each, considering the assured revenue contracts and escrow accounts tied to these endeavors, notes the securities firm.
Other banks supporting EA are also estimated to earmark loan loss provisions, according to UBS’s findings.
Bangkok Bank, Thailand’s largest bank, is poised to provide EA with 3.5 billion baht, comprising 2 billion baht in long-term loans and 1.5 billion baht in short-term loans, with an estimated provision of 1.45 billion baht for this corporate client.
Krungthai Bank, the nation’s second-largest bank, is set to extend a total of 2 billion baht to EA, evenly distributed between long-term and short-term loans at 1 billion baht each, with an estimated provision of 900 million baht.
Kasikornbank, Thailand’s third-largest bank, is expected to finance EA with 1 billion baht, split equally between long-term and short-term loans at 500 million baht each, with a reserve of 450 million baht.
TMBThanachart Bank (ttb) is anticipated to offer EA a 500 million baht short-term loan, allocating 350 million baht for loan loss reserves.
Furthermore, other banks are projected to have a total loan exposure to EA amounting to 9.24 billion baht, with 7.89 billion baht in long-term loans and 1.35 billion baht in short-term loans.
As per UBS research, the aggregate reserve for other creditors is expected to reach 2.52 billion baht.
