Insight: Big debts loom over Thai tycoons' bold bets

Sun Jun 9, 2013 5:06pm EDT
 
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By Saeed Azhar and Khettiya Jittapong

SINGAPORE/BANGKOK (Reuters) - Two Thai business tycoons, one a politically connected Chinese speaker, the other the son of a street vendor, have spent $27 billion on acquisitions in the past year, mainly abroad - more than all Thai firms spent overseas in the previous three years.

The billionaires - 74-year-old Dhanin Chearavanont and Charoen Sirivadhanabhakdi, five years his junior - personify Thailand's bull market and Asia's frothy credit, feeding on fast, cheap loans bolstered by a surging local currency.

The worry though is that they also represent the financial risks building inside Thailand and elsewhere in Asia amid signs of economic slowdown and tighter lending markets. Consumer growth needs to stay fairly robust to justify the valuations paid for these deals, said Standard Chartered analyst Nirgunan Tiruchelvam.

So far, Dhanin and Charoen look to be digesting their spoils without issue, but some warning bells are ringing about the high prices paid and the heavy debt load taken on - loans that are tied to real estate and a skittish Bangkok stock market that can swing sharply even when interest rates rise, let alone if there's a credit crunch or steep economic slowdown.

"I'm a little concerned about Thailand, to be honest. It's all debt. I've been in Asia long enough to remember how messed up Thailand was," said a veteran Asia investment banker in Hong Kong, recalling the 1997 Asia financial crisis. "Financing was pretty cheap, interest rates were low. And once the music stopped ..?"

AUSPICIOUS

Early on April 23, bankers, lawyers and executives gathered in HSBC's Hong Kong boardroom to sign the $6.6 billion purchase of Thai wholesaler Siam Makro MAKR.BK by CP ALL CPALL.BK, the retail arm of Dhanin's CP Group conglomerate. According to some of those present, Dhanin's son called for hush and counted down the seconds so his father could sign at exactly 8:45 Bangkok time - as advised by his feng shui consultant to maximize good fortune - revealing both Dhanin's ability to command a roomful of powerful financiers and the Chinese influence on his personal and business life. The number 8 - linked by Chinese to prosperity - figures frequently in deals.

Dhanin's father, Chia Ek Chor, left Guangdong in China in 1921 and, a quarter of a century later, renamed his seed shop Charoen Pokphand - Thai for "prosperity of consumers" - and began diversifying. Dhanin, the youngest son, a cockfighting fan at boarding school, has run the business since he was 30, growing it into a multinational with ventures across farming, retail and telecoms. His sons Suphachai and Soopaki help manage the vast empire, say people close to the family.   Continued...

 
Dhanin Chearavanont, chairman of Thailand's largest agribusiness group, Charoen Pokphand Food, arrives at a Thailand-China Business Council Seminar in Bangkok March 15, 2013. REUTERS/Chaiwat Subprasom