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Sahaviriya Steel Industries debt worries investors
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Tuesday, 04 Dec 2012

Bangkok Post reported that a debt of THB 43 billion owed by Thailand's largest hot rolled coil steelmaker, Sahaviriya Steel Industries is placing pressure on its major lenders' share prices.

The three major lenders are Krung Thai Bank, Siam Commercial Bank and Tisco Bank.

Mr Woraphon Wiroonsri, an analyst at Maybank Kim Eng Securities said that concerns for investors include SSI's poor performance and potential problems for liquidity.

Mr Woraphon said that if the debt becomes a non-performing loan, KTB may have to set aside an additional THB 7 billion in loan loss reserves for SSI.

As Tisco and SCB have strong capital bases, the impact should be marginal even if they need to set aside a reserve for the SSI loan.

Mr Woraphon said that "Our projection has already incorporated a large extra provision for KTB. Tisco has loan exposure to equity and the capital base at a high level, and this may affect its dividend payout. We do not expect any significant impact on SCB.”

He added that "Overall, we see a limited impact on SSI lenders in any case. About 300 million baht borrowed from Thanachart Bank is expected be repaid with a source from its capital increase program."

He said lenders have provided loans totaling THB 43 billion to SSI. The steelmaker remains punctual in making interest payments but will have to repay part of the principal debt by mid 2013.

Mr Woraphon said that "With overall operations running efficiently in the second quarter of 2013 as planned, debt restructuring or debt rescheduling will still be needed given the tight liquidity.”

SSI's liquidity problem was caused by its subsidiary, SSI UK Ltd, which operates a steel products and smelting plant in Britain.

Source - Bangkok Post


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