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Wednesday, February 28, 2024

Boost Thai Markets: Deloitte’s Debt Management Plan

A new study by Deloitte Consulting finds room for improvement in the way that distressed debt is managed in Thailand today, with opportunities to introduce tax incentives and update regulatory guidelines that facilitate participation from institutional investors such as insurance companies and social security funds as well as a diverse groups of distressed debt managers such as private equity firms to take part in managing the increase in bad debt. 

Thailand’s distressed debt management playbook was forged in the fires of the 1997 Asian Financial Crisis. But strategies and capabilities have been stagnant in the three decades since, and today the nation is once again facing rising NPL levels.

Dr. Metinee Jongsaliswang, Thailand Country Consulting Leader, Deloitte Consulting, Southeast Asia, says, “A key consideration to improve the distressed debt management, based on analyses of global case studies, is to attract a more diverse group of distressed debt managers—including private equity firms, private debt firms, hedge funds, and other sophisticated General Partners (GPs)—by providing clearer regulatory guidelines, tax incentives, and/or other business incentives. These capital market stakeholders can bring restructuring & rehabilitation capabilities into the market to help distressed companies in Thailand emerge from bankruptcy.”

In leading markets such as the US, there’s a spirit of rehabilitation that permeates the ecosystem. US companies have opportunities to work with a menagerie of sophisticated investors to give their companies a second chance. That type of activity are less common in Thailand because turnaround capabilities are relatively nascent.

“The study also highlights opportunities to attract more liquidity into the market. This can occur, for example, by updating regulatory guidelines and enabling sophisticated Limited Partners (LPs) to invest—such as insurance companies, social security funds, pension funds, and/or family offices—while ensuring that proper guidelines are in place,” says Kenneth Tay, Executive Director in Financial Services at Deloitte Consulting.

“The Thai distressed debt market today is quite homogenous, with local Asset Management Companies dominating the action. Like any healthy ecosystem, we need a diversity of capital market players to participate—to ensure proper price discovery of distressed assets, adequate capacity to address rising debt levels, and continuous innovation in debt trading and resolution,” says Nilapa Buchasuk, Senior Manager in Financial Services at Deloitte Consulting.

“We know that distressed debt volumes in Thailand are rising. If we want to properly address these debts, we’ll need to modernize our ecosystem and attract adequate investment capital and top financial talent to manage the upcoming demands,” says Dr. Metinee.

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