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Airways disputes $7.4bn of aircraft claims

Thai Airways International Plc is challenging some US$7.4 billion in claims from dozens of aircraft lessors and engine service provider Rolls-Royce Holdings Plc, saying it is not liable for the monies because they concern future expenses and were incurred after the airline received bankruptcy protection from a Bangkok court.

Thailand’s flag carrier, which is undergoing a court-supervised restructuring to trim debt and return to profit by raising fresh capital, is disputing around 192 billion baht ($6.3 billion) claimed by 48 lessors including BOC Aviation Ltd and SMBC Aviation Capital Ltd, and another 33 billion baht that Rolls-Royce says it is owed for maintenance services, according to a copy of the debt rehabilitation plan seen by Bloomberg.

A spokesperson for Thai Airways declined to comment. Representatives from BOC Aviation, and Rolls-Royce and SMBC Aviation in Europe also declined to comment.

The disputed amount is more than half of Thai Airways’ total liabilities of 410 billion baht. Yet an amicable settlement with creditors is key for the airline to stave off bankruptcy.

The carrier will require 30 billion baht by the middle of this year to resume its scheduled commercial services and pay for one-time employee separation costs, Acting President Chansin Treenuchagron said earlier this month.

Some 50 billion baht of fresh capital in total will be sought over the next two years, either through new shares or borrowings.

The Finance Ministry, Thai Airways’ largest shareholder, has already backed the proposed restructuring, which also seeks to impose a three-year freeze on debt repayments, a waiver of unpaid interest on loans and the deferment of bond repayments for six years.

Thai Airways posted a record loss of $4.7 billion (144.6 billion baht) last year after most of its services were halted by border closures due to Covid-19.

Accumulated losses and mounting debt turned the airline’s equity negative prompting the Thai bourse to suspend its shares from trading last month. The stock fell 54% in 2020.

The carrier submitted the debt recast plan to the bankruptcy court on March 2 and expects creditors to vote on it on May 12.

Bondholders, although their repayments will be deferred, have not been asked to take any haircut on their principal. They are owed about 70 billion baht in total.

“Bondholders are very happy even though the repayment period will be extended for some time,” said Somboon Sangrungjang, a senior lawyer at Kudun & Partners Ltd, which represents the bondholders.

But he added there will be “some disputes between Thai Air and other creditors”.

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