Capital too scarce to buy back shares

Capital too scarce to buy back shares.

Despite a maximum two-year grace period, Thai enterprises might not be able to buy back stakes from foreign shareholders in line with the Foreign Business Act's draft regulations, due to a shortage of capital.

As a result, Thai shareholders have urged the government to consider extending the grace period to allow them to find new financial sources.

"The short grace period will cause financial difficulty with shareholder restructuring in line with the law's new restrictions, because companies have never known how much they have to spend to buy back the stake," Thanawat Polvichai, director of the Economic and Business Forecasting Centre at the University of the Thai Chamber of Commerce, said yesterday.

He said foreign shareholders could easily sell their stakes but that Thai shareholders probably could not purchase them, due to the huge amount of money needed. The government could not estimate the total capital required to purchase shares from foreign shareholders. Moreover, Thai shareholders would be unable to find sources of huge loans within two years.

A government survey has indicated about 1,337 companies in Annexes 1 and 2 have to restructure their businesses within two years.

However, the public is still worried that the amendments to the law will hit foreign-investor confidence, with investors withdrawing from the country.

"The amended act should only affect foreign investors' sentiment in the short term," Thanawat said, adding that the government has shown a clear intention to clarify the regulations for foreigners.

Petchanet Pratruangkrai

The Nation
Friday January 12, 2007