Italian-Thai Development Public Company Limited (SET: ITD) admitted that the report of the company not paying salary to its employee is true due to a lack of liquidity. The developer said that it is looking to secure loans from banks.
ITD wrote in a statement to the Stock Exchange of Thailand (SET) that the company is facing cash flow issues as revenue from construction projects is smaller than its overall expenses.
The situation is not going well for ITD to the point that the company said that this could lead to some employees to resign or be absent from work. It has to negotiate with its employees for a partial payment, while stating that the banks, as creditors supporting the construction projects, have already assisted ITD in this matter.
ITD noted that in the short term, the negotiations for loans from banks shall be concluded within 2-3 months. Furthermore, ITD expects that the situation will be back to its normal state within 2-3 months after the new loans are granted.
ITD is facing a liquidity crunch due to a slowdown in investment and approval from the government sector as the budget for FY2024 has yet to be approved. The company failed to pay its bonds that matured in February, but was granted by creditors to extend the maturity date to 2026 for the right price of coupon rates.
Late last month, the company admitted to the news report that it was seeking buyers to invest in the potash mining project in Udon Thani that the company holds 90% shareholding. It is said that the deal could value up to $500 million, which could help the company from this liquidity crunch.
ITD did not submit its earnings report for the year-end 2023, requesting the stock exchange for a postponement to March 29.
The 9M23 earnings showed 379 million baht of profit, but that was due to asset sales. Its historical record showed that the company had been booking consecutive losses for quite some time with a net loss of 4,759 million baht in 2022, 155 million baht in 2021, 1,104 million baht in 2020 and 37 million baht in 2019.
The market has been expecting some of the big commercial banks in Thailand to take a hit from the inability of ITD to pay its debt.
With the current financial status that proves to be difficult to even pay the salary for its employees, let alone creditors, it could cast doubt on financial institutions that were asked for more loans. Perhaps it would come with much higher interest.
In January 2024, CGS International Securities (Thailand) (CGSI) stated that 4Q23 net profit from seven Thai banks under its coverage missed expectation due to higher OPEX and credit cost.
The research pointed out that overall asset quality was mixed, while concerns aimed to Krung Thai Bank Public Company Limited (SET: KTB) and Kasikornbank Public Company Limited (SET: KBANK) over high credit costs of about 200-220bp in 4Q23. Both banks have raised concerns over one particular corporate customer and related companies, which they are monitoring for potential credit deterioration.
Due to this reason, CGSI believed that this could put pressure on the overall asset quality of other major Thai banks, such as Bangkok Bank Public Company Limited (SET: BBL), that are focused on the corporate segment as well., but still seeing a comfortable space on BBL’s balance sheet with its large loan loss reserve of 270 billion baht and NPL coverage of 315% as of 4Q23, which was the highest among Thai banks.
