A deal has been signed between the Thai ministry and PTT. The deal, if executed, will mark an important step in the attempt to restructure TPI's US$2.7billion debt. The debt restructuring process of TPI has been in litigation for nearly 7 years before the government took control of the work-out in 2003.
As per the deal, PTT, Thailand's state-controlled energy major is to buy 30% stake in Thai Petrochemical Industries, the country's largest corporate debt defaulter. PTT has signed an MOU with the Thai finance ministry to this effect. As part of the plan, the Government Pension Fund and the state-managed Vayupak Fund will acquire a 20% stake in TPI and the Government Savings Bank will acquire 10%.
TPI's creditors currently hold 75 per cent of TPI, which they acquired in a swap of US$750m of accrued interest for equity, as part of the first work-out. Under the plan, creditors are to be repaid US$650m from funds raised by the share sale to the strategic partner, and new investors. The creditors will also obtain a further $250m from the sale of TPI's shareholding in cement maker TPI Polene, or they will take direct control of the shares. The remaining $1.8bn of principal debt will be repaid in various stages and at various interest rates for more than 12 years.
However, the MOU is not a definitive share purchase agreement, as TPI's share price in the transaction needs to be determined. The offer price is expected to be fixed by the end of April, would be based on TPI's earnings forecast for the next 10 years. PTT will also need time to reassure its investors, many of whom are non-Thai, that this decision has not been taken under political pressure. PTT, which has profited from the recent high oil price, plans to use cash to make the purchase.