NPL Asia Issue 11, October 2009

Welcome to Issue 11 of NPL Asia, our newsletter covering the Asian non-performing loan (NPL) market.

Since our last issue, global financial markets have continued to fluctuate and the effects have been felt increasingly by the Asian economies, although it would appear to a lesser extent than the US and European economies. Most countries are however reporting greater NPL numbers and this trend is expected to continue throughout 2009.

Increasing NPL numbers should result in increased opportunities, but the overall economic situation and the
resulting impact on pricing has made deals harder to consummate, especially from a portfolio perspective. In turn, the volume of portfolio transactions has slowed notably in 2009, though transactions have still occurred in Taiwan, Thailand, Korea, India, Japan, China and Australia (primarily single credit commercial paper). This is a contrast to the much higher level of activity in Asian NPL markets over the past two to three years, with numerous portfolio transactions in Thailand, Malaysia, Taiwan, India and the Philippines to name a few.

Thailand highlights:

Thailand is still one of the more active markets for NPL transactions in Asia. However, pricing pressure has seen a number of deals not completed, including:

• Siam Commercial Bank (SCB) auctions in late 2008 and early 2009. Both auctions comprised primarily SME and retail loans with a face value of approximately US$90 million and US$65 million respectively.
• Bank of Ayudhya’s (BAY) approximately US$330 million portfolio comprising Corporate, SME and Retail tranches.
  While multiple bids were received for all tranches, negotiations with bidders failed to bridge the pricing gap.