NPL Asia - Issue 9, May 2008

Welcome to the first edition for 2008 of NPL Asia, our newsletter on the Asian non-performing loan (NPL) market. Since our last issue in March last year, we have seen a mix of trends. China continued to be slow, but other markets proved very active, most notably Thailand, with four of its banks selling NPLs worth over US$1 billion in the last quarter alone. Taiwan continued the trend of multiple sales, with Malaysia and India also hosting multiple sales. Vietnam is a new entrant, and certainly worth following in the next few years. To date there has been little activity there in portfolio sales but interest is strong and opportunities for single credit deals appear to be increasing.

On balance, the Asian NPL market in 2008 is expected to be active and at the time of writing there are at least four ongoing sales in the region. Clearly, one of the big questions in 2008 will be how the United States’ financial woes affect NPL sales/distressed deal activity. The impact is in fact likely to be minimal, as the appetite for distressed deals in Asia remains strong in terms of both portfolio and single deals.

Thailand highlights:

• After a number of years of little or no NPL portfolio activity, 2007 turned out to be one of the busiest years of NPL activity in Thailand since the Asian Economic Crisis of a decade earlier.
• Five banks held multiple tranche public auctions, including one bank holding multiple auctions.
• Investor interest in Thailand remains high, although deals – especially single credit deals – still remain challenging due to bank price expectations.
• The property sector continues to be very active, although this sector also represents the most likely opportunity for single credit/private equity type plays.