With anywhere between $2 billion and $5 billion of exposure to the 58 finance and securities companies recently suspended by the Thai government, foreign creditors are losing their chai yen(cool heart) and turning to the law courts to get their money back.
Driven to despair by the antics of the Bank of Thailand, political foot-dragging and an infuriating lack of information, one seven-bank syndicate is suing through the Thai courts in the hope of recovering at least some of the ¥4 billion ($33 million) loan it extended to Thana One Finance and Securities - one of the first 16 institutions to be closed down in June.
Some foreign lenders are crying foul. They claim that negative pledge covenants were broken when the central bank's Financial Institutions Development Fund (FIDF) was allowed to use assets of the troubled firms as security against funds to bail them out without existing creditors being consulted. One report said that Bt800 billion ($20 billion) of collateral had been raised by the FIDF against Bt400 billion of loans.
The case against Thana One is being brought by a syndicate led by United Overseas Bank of Singapore. Other participants in the two-year loan signed in July 1996 are UBS, Crédit Lyonnais, Royal Bank of Scotland, Tat Lee Bank, Asian Finance Corporation and Bank of Bahrain and Kuwait.