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Thai Eurobonds: Awash with default rumours

Corporate-finance teams are preparing for some late nights in Bangkok as they try to sort out the mess surrounding Thailand's corporate Eurobond issuers. In a movement akin to plate spinning, bankers are working on delicate negotiations over existing defaults while keeping an eye out for the next hapless issuer about to hit the floor.

Faced with interest payments which have doubled in baht terms as a result of the baht's depreciation, as well as a cashflow dry-up, a number of Thai issuers are facing the stark choice of restructuring or break-up. The archaic legal system means that for all but the most severe cases the restructuring option seems to be the favoured route among bondholders, spurred on by approaching premium put options and growing uncertainty over whether they will materialize.

Salomon Smith Barney fixed-income analyst Juanita Mayr's estimate is that 80% to 90% of Thai companies in the Euromarket need restructuring. Most of Thailand's corporate forays into the Euromarkets have been in the form of convertibles, but with a stock market which has halved in value in the past year and many companies trading below par, their conversion prices are laughable. Issuers are already struggling to meet interest payments and the death knell will be the put options, at least six of which come up for exercise in the second half of this year.

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