Sunday, November 9, 2008

Lehman Brothers failure in Thailand puts 50 billion baht of investments on market


BAM chief doubts fire-sale climate of 1997 will return


Distressed asset management was one of the few true sunrise industries to emerge from the 1997 economic crisis. But Bunyong Visatemongkolchai, president of Bangkok Commercial Asset Management (BAM), does not believe that history will necessary repeat itself.

''The economic slowdown today isn't really the same as during the 1997 economic crisis,'' he said. ''The Thai banking system today is much stronger, including in terms of asset quality.''

According to the Bank of Thailand, the financial sector had non-performing loans of 436.24 billion baht at the end of September, or 6.06% of total outstanding loans. This represents an improvement from the 451.24 billion baht, or 6.46% of total loans reported in June.

Mr Bunyong said that most bad loans represented existing assets that could be traced back to the 1997 crisis, rather than new defaults.

While the economic downturn will certainly lead to greater pressure on asset quality, Mr Bunyong doubted whether it will necessarily lead to a resurgence for the asset management sector, certainly not with a scope matching that a decade ago.

BAM, owned by the central bank's Financial Institutions Development Fund, was established after the crisis to manage the liquidation of assets from the defunct Bangkok Bank of Commerce. As the country's largest distressed asset company, it has since diversified to include restructuring assets purchased from other state and private banks.

Mr Bunyong added he did not believe the US economic crisis would result in a significant surge in distressed assets entering the market.

While the bankrupt investment bank Lehman Brothers was certain to sell off its 50 billion baht in hotel and office properties in Thailand, plenty of bidders are expected thanks to the top locations and quality.

Mr Bunyong said this contrasted significantly with the heavy discounts demanded in the property and asset sales that took place after 1997.

In any case, BAM plans to purchase 15 billion baht in new assets in 2009, the same as this year.

Distressed assets under BAM management now total 266.02 billion baht, of which 227.98 billion are non-performing loans and the rest distressed assets.

Mr Bunyong said BAM expected to turn a profit of two billion baht this year, with 1.7 billion booked already for the first nine months.

While BAM expects only a modest upturn in activity over the next few months, bankers said two auctions are currently under way for automobile hire-purchase assets sold by one local financial institution and another foreign company.

A number of local leasing firms are bidding for the assets, including Tisco Bank and Kasikorn Leasing, a unit of Kasikornbank.

Isara Wongrung, managing director of Kasikorn Leasing, said the company's board was considering the details of the auction. The sale was expected to be complete by the end of the year, he said, although he declined to identify the seller.

''But if we win the bid, it would help expand our portfolio significantly. We see the cost of acquiring the assets as cheaper than if we focused on organic growth,'' Mr Isara said.

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