Thailand - Thai firms eyeing takeovers unlikely to get European bank funding

Local companies in Thailand will have to rely on their own liquidity to acquire cheap businesses in Europe because banks there cannot lend massive amounts of money like before, according to Siam Commercial Bank.

Both Thai and European banks had arranged syndicated loans for Thai companies in buying assets in Europe, but European banks are no longer able to support foreign companies because they are facing risks from the euro-zone debt crisis.

SCB president Kannikar Chalitaporn said last week that the share of European banks in syndicated loans is not high.

Thai companies should prepare adequate funds on their own besides asking for financial assistance from local and foreign banks, he said.

Executive chairman Vichit Suraphongchai said Thai companies must seriously think if they want to venture out because of the higher cost of funds.

The European debt crisis is becoming an opportunity for Thai corporations to snap up businesses there at a low price. Food and retail companies are good targets because of their low risk.

Kannikar said European banks are still a key source of funds and Thai banks want them as partners in extending syndicated loans but their participation will not be high as before.

Commercial banks would play an important role as financial advisers to local companies amid the current volatility.

Vichit said the European debt crisis has weighed on commodity prices, so working capital loans would gradually decline, especially in the export sector.

The outlook for commercial bank lending next year is expected to be grimmer due to global uncertainty, he said.

Kannikar said the loan projection for next year would be based on the impact of the global economy, but loan growth would be lower than this year's 15-18 per cent.

Suwat Techawatanawana, executive vice president at Kasikornbank, said larger companies could not avoid the higher cost of funds.

Some customers in the electronics industry have abandoned their plan to expand overseas through mergers and acquisitions due to concerns about the debt problems there, he said.

Sucheera Pinijparakarn

The Nation (Thailand)

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