Thai Airways Closer to Rehabilitation Via Bankruptcy Court

State-run Thai Airways International Pcl is a step closer to restructuring via a bankruptcy court after a key government panel backed the plan, which is due for consideration by the Cabinet on Tuesday.

A committee that oversees policies for state enterprises agreed the airline should seek such a rehabilitation, government spokeswoman Narumon Pinyosinwat told reporters in Bangkok on Monday. Restructuring via a bankruptcy court is not the same thing as filing for bankruptcy and being wound up, she said.

“The committee agreed in principle for Thai Airways to enter the rehabilitation process,” she said.

Governments worldwide have devoted more than $85 billion to propping up airlines after the coronavirus pandemic wiped out travel demand and grounded fleets. Thailand’s borders are restricted under a state of emergency through May and most inbound international flights are banned until the end of June, though some domestic flights have restarted.

In a statement responding to a local news report, the carrier denied that a board meeting on May 15 passed a resolution to file for bankruptcy. The company’s reform plan was approved by its board on April 17, presented to the state enterprises office on April 29, and will soon be presented to the Cabinet “for further action,” according to the statement.

Deputy Prime Anutin Charnvirakul told reporters on Monday that the airline could cease to be a state enterprise once the restructuring is completed, to give it more flexibility. The Finance Ministry won’t act as a guarantor of the carrier’s debts, he said.

Debt, Bonds

Thai Airways, majority owned by the Finance Ministry, has outstanding debt of about 92 billion baht ($2.9 billion), of which approximately 78% is owed to bond investors, according to data compiled by Bloomberg.

Tris Rating Co., which is partly owned by S&P Global Ratings, has downgraded its rating on Thai Airways and the carrier’s senior unsecured bonds to BBB from A.

“Holders of Thai Airways’ bonds are watching closely for details of its rehabilitation plan,” Thiti Tantikulanan, senior executive vice president of Kasikornbank Pcl, said at a seminar. “The impact on the overall bond market will be limited because Thai Air bonds have been mostly sold to a limited group of investors.”

Thai Airways has posted annual losses almost every year since the start of 2013. The flag carrier was under pressure to turn around its performance even before the Covid-19 outbreak.

Shares in the airline slid 15% on Monday to the lowest level in more than a month. The stock has tumbled over 90% from a peak in 1999.