Thai Airways plans to sell hybrid bonds to cut debt

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BANGKOK: Thai Airways International Pcl is planning to sell up to 15 billion baht (RM1.48 billion) of hybrid bonds in July to help reduce debt at the loss-making carrier.

The bond issue comes after the resignation last week of five board members, enabling the ruling military government to reshuffle and restructure the national flagship carrier.

The airline plans to issue between 10 billion baht and 15 billion baht of bonds and will hold roadshows early next month, a senior company official said yesterday.

“If market conditions are favourable, the company will sell the bonds next month. The hybrid bond can be regarded as equity. This will help reduce debt and improve the airline’s balance sheet,” he said.

A spokesman for the company could not be reached for comment.

After spending heavily to expand its fleet in the past two years, Thai Airways had a debt-to-equity ratio of 3.4 times at the end of the first quarter.

The official gave no details on how much debt will be cut, saying it depends on the size of the loss Thai Airways reports for the second quarter.

The airline, which has also been hit by a drop in tourist arrivals in Thailand following months of political unrest, reported its fourth consecutive quarterly loss in the January-to-March quarter.

Some of the proceeds from the issue will also be used to finance aircraft purchases because the airline is due to take delivery of 12 planes during 2014-2015 as part of a 37-plane order, the official said.

The airline has named Barclays and Citigroup as financial advisers and joint lead managers for a potential issue of US dollar perpetual bonds, IFR reported in May.

Financial sources say the foreign bond markets are quite open to hybrid bond issues after recent offerings by state-owned Krung Thai Bank and top oil and gas explorer PTT Exploration and Production. — Reuters

This article first appeared in The Edge Financial Daily, on June 26, 2014.