Impact of Lehman bankruptcy
on Bangkok commercial real estate market?
By Jon Fernquest |
Lehman Brothers, which filed for bankruptcy on Monday in the largest bankruptcy case in American history, is also one of the largest owners of commercial real estate in Bangkok (holder of commercial space) .
Lehman Brothers owns around 50 billion baht of the highest quality property, hotels and offices in Thailand. Office space holdings alone amount to around 100,000 square metres in well-known buildings such as the Italian-Thai Building, Pacific Place on Sukhumvit Road, the Mercury Tower and the Muang Thai Phatra Building.
Lehman Brothers has also also provided financing for several property developers in Thailand listed on the Thai stock exchange including Raimon Land Plc, Grande Asset Hotels and Property, and Ascon Construction. Lehman reportedly as outstanding commitments of 10 billion baht to three listed companies.
Raimon land, for one, has claimed that Lehman bankruptcy has not had any impact on its business operations. Lehman owns 7.5% of Ascon Construction that other shareholders are now interested in repurchasing. Loans from Lehman for the firm's Dubai project were under consideration but never made, so there is no problem there.
Who will purchase Lehman's Thai real estate holdings and for how much?
The big question is who would buy Lehman's massive real estate holdings when the firms assets are liquidated during bankruptcy proceedings?
Foreign investors may not be in a position to purchase these properties due to a combination of laws and a current environment of investor caution. The Bank of Thailand (BOT) restricts investment by foreign commercial banks in Thailand. Prices might drop a little by 20% to 30% below market value if a forced sale under bankruptcy proceedings was required.
All told, Thai banks have 4.3 billion baht of exposure to Lehman Brothers in the form of loans or bonds. The Bank of Thailand (BOT) is monitoring the situation closely.
(Source: Bangkok Post, POST REPORTERS, 17-09-09, temp-link)
Vocabulary:
Lehman Brothers - one of America's largest investment banks and financial services firms, founded in 1850, filed for bankruptcy on Monday, the largest bankruptcy in US history (See Wikipedia)
bankruptcy - when a company makes an official legal declaration that they can no longer pay back the money they (pay their creditors), a court case will then sell off the company's assets to pay creditors (See Wikipedia)
filed for bankruptcy - officially ending a business (after which the court will have the assets of the business sold to pay off the people owed money by the bankrupt company)
commercial space - commercial real estate, space in buildings for the offices and stores owned by companies
holders of commercial space - the owners of commercial real estate
holdings - the real estate and businesses that a company owns
commitments - the things you've promised to do
outstanding commitments - the things you've promised to do that you haven't done yet
company listed on the stock exchange - the stock of the company is traded on the stock exchange, and the company makes information about the performance of the company publicly available in annual or quarterly reports, as required by law
listed companies - companies whose stock is traded on the stock exchange (this makes it easier for the company to issue stock and raise money in the future)
liquidate - sell an asset to get cash, that can be used to other assets now or in the future (See glossary #1 and #2)
liquidated during bankruptcy proceedings - the selling of the company's assets to pay the people that the company owes money (the creditors)
exposure - the risk of losing money on an investment or an asset, the amount that could tbe lost, the amount of loans that has been lent (See glossary)
monitoring the situation closely - watch details of the situation closely to see if their are problems that affect you
