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Restructuring victory

Thailand's new bankruptcy court sent out an encouraging message to international lenders in March when it declared the country's largest debt defaulter insolvent in a benchmark case that paved the way for its restructuring.

Thai Petrochemical Industry (TPI) owes $3.5 billion to lenders including Bangkok Bank, Citibank, the IFC, US Export-Import Bank and Bank of America. Led by its chief executive, Prachai Leopairatana, it argued its assets still exceeded its liabilities, and that Prachai should be allowed to remain in control of the company. In a move widely praised by creditors and analysts, the court took a wider view of insolvency, rejecting the company's asset valuations and focusing on its inability to service its borrowings since the 1997 baht devaluation.

"It is a landmark which defines how the court will use its latitude in determining insolvency and the ruling for creditors in this case means there will now be more unilateral bankruptcy cases pushed through without the cooperation of debtors," says Sriyan Pietersz, head of research at SG Asia Credit Securities. "It's good news in the sense that this was a decision that investors, creditors and debtors were all watching with great concern beyond the issue of TPI," he adds.

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