Stark warning over potential bond default

SET urges caution as trading resumes

Stock market regulators yesterday warned investors to exercise caution in trading shares of Stark Corporation, saying the listed wire and cable maker is likely to default on payment of corporate bonds worth nearly 9.2 billion baht.

Stark convened a bondholders’ meeting on Wednesday and resolved to call for immediately due or “call default” of two bond series worth 2.24 billion baht within 30 days, according to the company’s filing to the Stock Exchange of Thailand (SET) yesterday.

The resolution means it is highly unlikely that Stark will be able to pay for three other bond series with a total outstanding value of roughly 6.96 billion baht, also known as “cross default”, said major shareholder and director Vonnarat Tangkaravakoon in the filing.

Kasikornbank is the representative for four of the five series of corporate bonds for which Stark is likely to default on payment.

The outstanding value of the first tranche is 1.29 billion baht, with payment due this year, while the second tranche of 949.5 million baht is due for redemption next year, according to the Securities and Exchange Commission (SEC).

The third tranche is also set to redeem in 2024 with outstanding value of 1.7 billion baht, while the fourth series of 1.32 billion baht is due in 2025.

The fifth bond series has Asia Plus Securities as the bondholder’s representative, with 3.93 billion baht that should redeem next year, said the regulator.

The SEC opened a bond information centre yesterday to facilitate investors viewing necessary information about the bonds. As for the bondholders’ representatives, they must follow up on the legal debt repayment process, the regulator acknowledged.

The SET issued a warning over trading Stark shares, which resumed yesterday after three months of suspension.

The bourse posted a suspension (SP) sign on the shares since March 1 because the company failed to submit its 2022 financial statements and was subsequently ordered by the SEC to conduct a special audit.

Mr Vonnarat said other financial creditors may also call for the same treatment as bondholders. The company is considering communicating with and negotiating a solution with creditors so they will refrain from exercising this right, he said.

The company is unable to estimate the outstanding debts likely to be required to have the same treatment as the bonds, said Mr Vonnarat.

To avoid any risk associated with an action that may be deemed as discriminatory or preferential to a group of creditors over any other creditors, Stark must exercise caution in paying any group of creditors because it may adversely affect negotiations with other groups of creditors, he said.

“The payment of any debt should be withheld until we reach a conclusion on the method of managing debt payments equally among bondholders and other creditors,” said Mr Vonnarat.

Stark is in the process of preparing short- and long-term business plans, as well as alternative business plans, to be incorporated in the 2022 financial statement expected to be submitted by June 16, he said.

Management plans to notify regulators, creditors and shareholders the steps and procedures to be taken by the company, Mr Vonnarat said.

The SET is allowing Stark shares to be temporarily traded from June 1-30. Shortly after the stock market opened yesterday, Stark shares plunged by more than 90% from 2.38 baht before the SP sign was posted, to 0.25 baht, with the lowest price 0.17 baht in morning trade.

Payment of any debt should be withheld until we reach a conclusion on the method of managing debt payments equally among bondholders and other creditors. VONNARAT TANGKARAVAKOON Director, Stark Corporation