'High-Yield' Bond Defaults Looming: Energy and Property Sectors Under Scrutiny

ThaiBMA warns of increased debt extensions as economic headwinds batter businesses, with high-risk bonds in focus

 

The Thai Bond Market Association (ThaiBMA) is bracing for a surge in "debt extensions" from high-yield corporate bonds in the second half of 2025. 

 

Prolonged negative factors are expected to weigh on the economy, particularly impacting businesses in the energy and real estate sectors.

 

Ariya Tiranaprakij, Deputy Managing Director of the ThaiBMA, informed Krungthep Turakij that while immediate direct pressure on the Thai bond market isn't evident from escalating conflicts in the Middle East and domestic political instability, the situation could change.

 


"If both scenarios persist and inevitably affect the overall economy and various business sectors, especially those sensitive to interest rates and energy costs, like the energy sector, it will become a concern," Ariya explained. "Currently, the real estate sector faces significant challenges and is under close observation."


 

The association anticipates a continued trend of companies seeking extensions for principal and interest repayments to stay afloat, as the economic climate remains highly uncertain due to both domestic and international factors.

 


"From the perspective of bond investors, the expectation is simply for issuers to genuinely commit to resolving issues and helping their businesses survive," Ariya added. "If they still possess cash and assets, resorting to debt extensions would be considered inappropriate for bondholders."
 
 

A Growing List of Troubled Bonds

Data from the ThaiBMA website reveals that between January 1 and June 24, 2025, corporate bond defaults (DP) totalled 2.009 billion baht from four issuers.

 

This follows 3.172 billion baht in defaults from five issuers in 2024 and a substantial 16.363 billion baht from five issuers in 2023.

 

Furthermore, "corporate bonds with postponed payment dates" (RS) reached 14.828 billion baht from 15 issuers. Notably, seven issuers (RICHY, PRIME, NRF, EP, TPOLY, B, and JTS) have only just begun postponing payments in 2025, compared to 17 issuers totalling 37.963 billion baht in 2024, and 14 issuers with 12.443 billion baht in 2023.

 

The association is also proactive in monitoring upcoming bond maturities, especially for less well-known small and medium-sized companies. 

 

When conditions are unfavourable, these firms often seek liquidity solutions, such as borrowing from directors or selling assets, to meet their obligations to bondholders.

 

Alternatively, some may negotiate with bondholders, presenting repayment plans that include extended payment periods and increased interest rates. 

 

This is seen as a better approach than defaulting or going bankrupt, which can lead to lengthy and uncertain rehabilitation processes. 

 


"Issuers requesting extensions demonstrate an effort to sustain their businesses and repay debt, which is preferable to companies allowing themselves to collapse and exploit legal loopholes to enter rehabilitation plans, effectively avoiding repayment for years," Ariya stated.
 
 

 



 

Conversely, large corporations can issue and offer bonds as usual. With interest rates falling, they can still compare the cost of bank loans with bond issuance. 

 

The ThaiBMA has been engaging with issuers months in advance to ascertain their repayment capabilities and sources of funds, receiving cooperation from distributors, bondholder representatives, and many issuers.

 

 

 

Issuance Slowdown but Outlook Stable

New corporate bond issuances for 2025, as of June 24, stand at 378 billion baht, down from 462 billion baht in the same period last year. 

 

The decline is predominantly in the high-yield segment. Despite this, the target for new bond issuances this year remains 900 billion baht. 

 

This is based on the view that large companies are unaffected by negative factors this year, and declining interest rates present opportunities for fundraising. 

 

However, businesses generally remain cautious, and when negative factors emerge, bond yields tend to fall as investors seek safer assets.

 

Bodin Buddhain, Director of Investment Strategy at Eastspring Asset Management (Thailand), observed that June has seen a rise in defaults and debt extensions, mainly in the high-yield sector. 

 


"This reflects early signs of the Thai economy's fragility impacting the profitability of listed companies," he said. "The economic outlook for this year still carries a risk of growth below potential, due to high uncertainty from both domestic politics and the Trump tariff negotiations."


 

Eastspring's fund strategy avoids investing in corporate bonds rated BBB and BBB-, as these are at risk of being downgraded to high-yield if they cannot meet their obligations. Instead, the focus is on higher-quality instruments rated A- and above, with consideration for business growth prospects and profits from core operations, rather than from exchange rate gains or asset sales. Caution is also advised for sectors tied to economic cycles.

(2025/06/27-00:00)