Steelmaker must raise capital to pay off debts

SSI UK's steel furnace and coal-fired power plant in Teesside, England. The loss-making facility ceased operations last year after the parent company announced a liquidation plan.

The Central Bankruptcy Court yesterday approved the debt rehabilitation plan for Sahaviriya Steel Industries Plc (SSI), the country's largest hot-rolled steelmaker, allowing it to move forward with a capital restructuring and capital boosting plan.

The rehabilitation plan will finally allow the creditors to hold up to 91.9% of voting rights in the company.

The court has placed the creditors who filed applications for repayment of debts into 13 classes that SSI will have to gradually repay, with total debts standing at 69.2 billion baht.

Of the total, 63.9 billion baht was the principal, while the remaining 5.3 billion constituted the interest.

The debts were classified into 33.8 billion baht, £4.7 billion, €89.2 million and US$990 million, according to the court order.

Since SSI's liabilities are higher than its assets, however, the court has ordered the company to raise capital.

As of the day that the court issued the rehabilitation order, the company had registered capital of 50.2 billion shares at a par value of one baht per share.

The court ordered SSI to decrease its registered but unissued ordinary share of 18 billion shares, reducing its registered capital to 32.2 billion shares.

The court ordered SSI to increase the total value registered and paid up share by 10 billion by issuing 10 billion in ordinary shares to be the reserve share for debt to equity conversion for the creditors.

The conversion rate is 0.05 baht per one share.

After being completed, the company would have the registered and paid up share capital of approximately 11.1 million shares.

After the rehabilitation process creditors will take 91.9% of voting rights in the company.

SSI's three major creditors are Krungthai Bank (KTB), Siam Commercial Bank (SCB) and Tisco Bank. Analysts have said they would convert their defaulted loans into performing loans once the court approved the rehabilitation plan.

The loans lent to SSI amount to 30 billion baht and represent 8% of commercial lenders' total non-performing loans (NPLs) of 390 billion. In terms of gross NPLs, they account for 2.8-2.9% of commercial banks' 13 trillion baht in outstanding loans.

SSI and its loss-making subsidiary, SSI UK, which operated a steel plant in Teesside, England, borrowed a combined 48.4 billion baht from the three lenders -- 22 billion each from KTB and SCB and 4.4 billion from Tisco Bank.

They defaulted in September last year.

The liquidation of SSI UK was announced by SSI late last year, when the company submitted its debt rehabilitation plan to the Bankruptcy Court after a massive loan default. SSI UK then ceased operations.

Win Viriyaprapaikit, president and chief executive of SSI, was not available for comment.