Thailand: Background

1
NAKORNTHON BANK
2
Thailand Background

• The Past
• Currency Crisis
• The Present Future
• Public Sector vs. Private Sector
• Legal System Reform
• bankruptcy code
• foreclosure
• Parliamentary Conflict
• Privatization Program

NAKORNTHON BANK
3
Nakornthon Situation

• Capital
• Ownership

NAKORNTHON BANK
4
Banking System Re-capitalization

• Tier One
• Bank issues preferred shares in exchange for
  tradeable government bonds
• NPLs fully provisioned
• Tier Two
• Bank exchanges subordinated debentures for
  non-tradeable, convertible government bonds
• NPLs provisioned in accord with LCP 2000
• negative arbitrage

NAKORNTHON BANK
5
Banking System Re-capitalization

• Foreign Capital
• foreign banks
• ABN Amro purchased 75 of Bank of Asia
• Thai Danu 50.1 owned by Development Bank of
  Singapore
• Sanwa increasing stake in Siam Commercial

NAKORNTHON BANK
6
Strategic Partners

• Bank of Nova Scotia (Canada)
• Standard Chartered (United Kingdom)
• United Overseas Bank (Singapore)

Strategic fit Seeking branch network throughout
Thailand Build upon limited operations in
Thailand global network Good management/reputati
on
Main concerns Stability of regional
economy Overstaffing/high operating
costs NON-PERFORMING LOANS
NAKORNTHON BANK
7
Cash Flow Projections

• Assumptions
• Re-capitalization
• Government assistance vs. foreign partner
• Loan loss provision and NPLs
• Interest Rates
• Deposits
• Loans
• Thai Baht vs. U.S. Dollar

NAKORNTHON BANK
8
WACC gt 11.65

• Tax Rate of 28
• 60 MM (2.3 bil baht) in U.S. denominated debt at
  8
• This debt expires in 2003 and 2005, but will have
  to be rolled-over
• 4 bil baht in Thai Government bonds at 11
• This is a ten year note starting at the time of
  re-capitalization
• 2.1 bil baht in equity need to maintain Tier I
  capital requirements
• Risk free rate of 5.5
• Market risk premium 19.4 for Thailand using EHV
  method
• NTB beta from Thai stock market is 1.01,
  signaling parity with the overall Thai market
• The average beta for Thai banks is 1.45

NAKORNTHON BANK
9
Nakornthon Valuation
(000s Thai Baht)

• Terminal Value 852,248 THB
• Discounted Cash Flow 1,243,244 THB
• TOTAL VALUE 2,095,402 THB
• Less Restructure Cost (17,212,282 THB)
• USD Equivalent (491,779,000)

NAKORNTHON BANK