NPL Asia Issue 10, December 2008

Welcome to issue 10 of NPL Asia, our newsletter on the Asian non-performing loan (NPL) market. Since our last issue in May, global financial markets have experienced a period of extraordinary turbulence. Several governments have initiated rescue efforts but financial markets are likely to remain volatile for some time. While over the past 18 months or so the NPL market probably favoured sellers, recent events are reversing this and it is likely to be a buyers’ market for the foreseeable future. Opportunities for buyers lie in upcoming NPL portfolio sales across Asia which are likely to include, the sale of Lehman Brothers’ Asian assets (their NPL portfolios in Europe are already in the process of being sold), the disposal of various AIG businesses and the sale of positions held by numerous funds and investment banks needing to raise cash. Several single credit opportunities are expected to arise
as businesses look to recapitalise balance sheets in an increasingly difficult economic environment.

According to market feedback, there is an increase in expectations of returns from NPL portfolios investments, at least in the short to medium term. This is due to the number of opportunities coming on to the market that offer equal or higher returns than those that are traditionally achieved from NPL portfolios. These alternative opportunities are prompting some distressed debt players to shift away temporarily from NPL portfolios. However, these players are being replaced by new participants who see Asian NPL portfolios, particularly secured portfolios, as investments that continue to offer attractive rates of return.

Thailand highlights:

• Notwithstanding the potential impact of the recent turmoil in financial markets, Thailand continues to host the most active NPL market in Asia.
• A number of public auctions and privately negotiated deals have been finalised during 2008. At least six banks have held NPL portfolio auctions and, according to market rumour, a number of privately negotiated deals have also been consummated.
• The Financial Institutions Development Fund (FIDF) successfully sold its 42.1 per cent stake in Bank Thai.