The Ministry of Finance is preparing to convert the debt of Thai Airways International into equity, with a proposal slated for submission to the cabinet this month as part of a strategy to bolster the airline’s capital.
As a significant creditor, holding a 40% stake in the airline, the ministry intends to exercise its right to transform 100% of the debt owed to it—totaling between 70 to 80 billion baht—into shares. This debt has been accumulated since 2020, according to Tibordee Wattanakul, director-general of the State Enterprise Policy Office.
The airline’s rehabilitation plan necessitates that creditors convert 24.5% of their debt into equity, with the remaining 75.5% left to their discretion.
The ministry opted for a complete equity conversion, citing improvements in the airline’s financial performance. Once THAI resumes trading on the Stock Exchange of Thailand, creditors will have the option to sell their shares after a one-year holding period. Those choosing to wait for debt repayment could face a lengthy process of 11 to 12 years.
“The benefit of converting debt into equity is that, after a one-year holding period, if the stock price appreciates, we can sell the shares to recoup funds,” Mr. Tibordee explained. “On the other hand, waiting for repayment could take a significant amount of time, even though it carries an interest rate 1.5% higher than the debt’s value.”
Mr. Tibordee anticipates that some other creditors may also opt for equity conversion, although the specific proportions are still uncertain. Creditors are required to notify their decision by Nov 21. Thai Airways must then disclose the details of the debt-to-equity conversion to its shareholders, allowing them to gauge how much capital they wish to contribute to maintain their ownership stakes.
The airline must announce the share price for the capital increase to shareholders by Dec 2. The Ministry of Finance aims to assess the specifics of creditors’ debt-to-equity conversions and the proposed share price to determine the necessary funds to sustain its ownership percentage.
While the ministry does not plan to increase its shareholding in THAI to avoid the airline reverting to a state enterprise status, it seeks to maintain a stake slightly above 40% to retain management authority.
The ministry intends to present the capital increase proposal to the cabinet for approval within this month to meet the Dec 11 capital injection deadline. Currently, the airline is evaluating its financial performance in preparation for exiting rehabilitation, anticipated by February 2025, and plans to resume trading on the stock exchange around May 2025.
