Back in good health

Back in good health.

Phyathai Hospital Group is a lesson for others in the way that it has battled its way out of debt, and is now focusing on its core healthcare business.

Coporations should learn from their mistakes, and if they follow this principle, it may create a future clear of indebtedness. This is a lesson offered by Prasit Patana, operator of the Phyathai Hospital Group.

Prasit Patana was a victim of the baht float in the 1997 financial crisis. Like other firms, its debts were mainly in US dollars, and its level of indebtedness in baht terms skyrocketed from a few thousand million to Bt15 billion.

Prasit Patana might not have been hard hit by its towering debt burden if it had not over-invested in assets unrelated to the healthcare business, which is its core business. Fortunately, it took this as a lesson for the future.

When undergoing rehabilitation in the middle of 1999, the hospital operator learned about the just-in-time delivery principle, which is not only good for logistics service providers, but also saves debtors' costs from rescheduled debts.

Chief operating officer Kraivin Srikraivin says most of the company's debts were in US dollars, and it had no hedging for foreign exchange risks. As well, after it stopped debt repayment it suffered the punishment of penalty rates on top of its outstanding debts.

Following the imposition of a debt-restructuring plan, Prasit Patana received a debt haircut, reducing its outstanding debts to Bt4.8 billion. After that it refinanced and the interest it had to pay tumbled from 10 per cent annually to 4.5 per cent. "This enabled the company to save interest repayments amounting to Bt150 million on principal of Bt4.8 billion," Kraivin says.

Since withdrawing from rehabilitation in 2003, Prasit Patana repaid its restructured debts so strictly that it later received forgiveness for a further Bt1.2 billion of debt. Following the rehabilitation plan required strict discipline.

"Now, the company's total debts have fallen to Bt4.4 billion," Kraivin says.

Under its rehabilitation plan, Prasit Patana disposed of its non-core assets, which were mostly properties, including a commercial building and 1,000 rai of vacant land. But, it still booked a deficit of Bt2.6 billion in equity after withdrawing from the plan because it sold the assets at a loss.

However, the company's equity has now swung into the black, with a surplus of nearly Bt200 billion.

For the first nine months of last year, Prasit Patana recorded Bt3.22 billion in revenue and Bt48.14 million in net profit.

With a total of 1,000 beds and 4,500 patient visits a day, Phyathai Hospital group is now back to the basics of focusing on its core business. Moreover, Kraivin says the company's future business expansions will be horizontal, and related to healthcare services.

Under its new shareholders, Wichai Thongtaeng and his family, who hold a combined stake of nearly 50 per cent, Prasit Patana has been transformed from a vertically diversified business into horizontally expanded businesses.

Last year, the company launched a three-year business plan with an investment budget of Bt3 billion by investing heavily in human resources, hospital building renovations and new equipment. It recruited about 600 new nurses.

"The company wants the Phyathai Hospital group to offer preventive and curative healthcare services," he says. "We think these investments will help the company save its future costs."

The company also expects Thailand's healthcare services industry to grow more rapidly in the future.

Sasithorn Ongdee

The Nation
Friday January 12, 2007