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Thai Airways begins rehab proceedings in bankruptcy court

Some creditors question legitimacy of process while investors sell off shares

Thai Airways' total shareholders' equity turned negative at minus 18.1 billion baht as of June due to a net loss of 28 billion baht in the first half of this year.   © AP

BANGKOK -- Thai Airways International's rehabilitation proceedings kicked off at Thailand's Central Bankruptcy Court on Monday, with executives from the cash-strapped national airline and its creditors attending the hearing.

Acting President Chansin Treenuchagron and two members of the airline's board represented the company as witnesses. Roughly 100 people attended the hearing.

In these early stages of proceedings, the court will determine if the airline can legally enter reorganization. It will also pass judgment on the qualifications of the nominated planners -- Thai Airways board members and consultancy firm EY Corporate Advisory Services.

The court said it will require two more days of hearings to decide on those issues. It told witnesses that they will likely be called back on Aug. 20 and 25.

Lawyers representing seven creditors questioned the legitimacy of the rehabilitation process and the qualification of the planners. "Are you aware that none of the board members of the consultancy firm had run a company worth more than 100 billion baht ($3.2 billion)?" one lawyer asked.

Chansin and his fellow board members, including former Thai Airways President Piyasvasti Amranand, said they were not aware, but they expressed faith in the firm's capability. EY Corporate Advisory Services has no link with London-headquartered multinational accounting and consultancy agency Ernst & Young Global.

Thai Airways said several major creditors, including the Ministry of Finance, have submitted a letter expressing their support for its reorganization. These creditors also did not object to the nominated planners. The supporters accounted for more than 50% of the airline's debt pile as at the end of the second quarter of 2020, it said.

The rehabilitation plan needs the endorsement of holders of 50% of the airline's debt. The plan will have to be devised and submitted by the nominated planners. 

Thai Airways shares slipped as much as 14.5% during Monday trade, and finished down 11.9% at 3.4 baht apiece. The stock was suspended on Friday after its auditor, Deloitte Touche Tohmatsu Jaiyos, said it could not sign off on the company's financial statements for the six months to end-June due to a lack of liquidity and debt defaults.

The unaudited results showed that the national flag carrier's total shareholders' equity turned negative to minus 18.1 billion baht as of June, as its total liabilities ballooned by 36.7% to 332.1 billion baht from the end of 2019.

The Stock Exchange of Thailand requires companies to raise the value of their stock from negative shareholders' equity within three years or face removal from the bourse.

The auditor pointed out that the airline has posted losses since 2013 "which resulted in capital deficiency and lack of financial liquidity." The pandemic "may have a significant impact on the flight plan, the financial position, the ability to generate revenues, and current and future cash flows of the group," it added.

The carrier's net loss for the first half of this year was 28 billion baht, a 4.4-fold expansion from the same period the previous year. 

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