Group Lease attempts to reassure investors on loans

SET-listed Group Lease Plc (GL) will call additional loan collateral from its Cypriot debtor and insists it does not need to set aside loan-loss provisions to cover its intercompany loans.

The moves are meant to restore investor confidence after recent sharp selloffs prompted by concerns over Group Lease’s lending to companies in Cyprus and Singapore.

Chairman and chief executive Mitsuji Konoshita said in an urgent press briefing yesterday that the loans were not regarded as connected transactions, as borrowers from both countries do not own more than 10% of GL shares and their directors do not hold any of the leasing firm’s board seats.

GL shares yo-yoed yesterday, sliding by almost 30% to 12.40 baht at the opening bell before bouncing back to close 29.9% higher at 23 baht after the company’s assurances about its loans to foreign companies. GL led in turnover with trade worth 8.25 billion baht.

The stock has been in a tailspin since last week, when a columnist of local newspaper Khao Hoon highlighted an auditor’s disclaimer in Group Lease’s 2016 financial statements, noting that the leasing company owed loans to GLH, a wholly owned subsidiary in Singapore, which in turn loaned to two groups of borrowers in Cyprus and in Singapore.

Those borrowers are also shareholders of the company and have pledged their shares in GL against those loans with the company’s subsidiary in Singapore. Securities of properties in Cyprus and Brazil, Cypriot government bonds and stocks of other overseas companies have also been used as collateral for the loans.

Group Lease’s share price has tumbled from 59 baht at the end of February.

Mr Konoshita said the company will ask for more loan collateral from the borrower in Cyprus, as GL shares pledged for the loan in this case account for 40% of the lending.

The Cyprus borrower plans to pledge land and factories for the loan, he said.

For the Singaporean borrowers, Group Lease does not plan to call more loan collateral. Its parent, a large company in Japan, has guaranteed the loan, Mr Konoshita said.

He insisted that both firms can service their debt as normal.

A filing to the Stock Exchange of Thailand said Group Lease’s loans outstanding to borrowers in Singapore amounted to US$56.3 million and the Thai company charges interest on them at 18.1%. Its loans outstanding to Cyprus borrowers totalled $41.8 million and it charges them 15% interest.

Borrowers in Singapore hold a combined 75 million shares in GL, some 4.96% of the total, while Cyprus borrowers own 11.5 million shares, a mere 0.75%.

In a related development, Mr Konoshita said Group Lease has cash on hand of 2.5 billion baht and it will receive $50 million this month from J-Trust exercising its rights in converting GL’s convertible debentures and warrant-4 into common shares.

Upon the conversion, J-Trust’s shareholding in GL will double to 10%.

The company has no liquidity problems and can expand its business as planned, including takeovers of overseas companies, Mr Konoshita said.

Group Lease recently said it aimed to double net profit this year to 2 billion baht through a mix of organic growth and mergers and acquisitions.