Perspective can be a key factor in assessing Thailand: The bird gets a very different view from the worm.
Moody's Investors Service is swooping in from above. On Friday, it affirmed the country's Baa1 rating — two rungs higher than Indonesia and India — and said it expects Thailand to post its best GDP growth for five years in 2017. Easing of political uncertainty, the agency says, will aid "the current cyclical recovery, spurred by stronger exports."
With one former prime minister living in Dubai as a fugitive and his sister, also a former prime minister, fleeing the country ahead of a possible 10-year jail term, Thai politics is indeed becoming more certain — to the extent that absence of competition makes any monopoly more secure.
The military junta, in control since it toppled Yingluck Shinawatra's government in May 2014, is overseeing what a Council on Foreign Relations scholar terms an uneasy peace. Yingluck's departure means her supporters won't be fighting in the streets, though nobody knows how long the calm will prevail.
Leave all that aside, and focus on the worm's view. Credit Suisse Group AG has a perfect candidate: Pace Development Corp., which bought coffee chain Dean & DeLuca Inc. for $140 million three years ago. Now it has 15 billion baht ($452 million) of debt to repay over the next 12 months.
That would be small change, except that Pace is also building an observation deck and a bar atop Bangkok's tallest tower, where it's started selling Ritz-Carlton apartments. The deck, which CNN Travel in July described as a "mass of scaffolding," won't open until next year, but the company has decided to value it at more than 8 billion baht based on the report of an independent adviser.
Baker Tilly Audit and Advisory Services (Thailand) Ltd. wrote a disclaimer about that conclusion and qualified the company's second-quarter accounts, which Credit Suisse analyst Dan Fineman and others say is a reminder of hidden risks at banks.
With a debt-to-equity ratio of 290 percent, and negative operating cash, the only way Pace can carry on is if banks reschedule its principal repayments. The brokerage believes they will, but without marking them as nonperforming or restructured.
That would be a repeat of the Sahaviriya Steel Industries Pcl saga. The steelmaker shut down its British furnaces in 2015 after welshing on nearly $1.4 billion of loans, Thailand's biggest corporate default since Thai Petrochemical Industry Pcl buckled under $3.8 billion of liabilities during the 1997 Asian crisis. Before Sahaviriya blew up, lenders had made few precautionary provisions, so they had to scramble.
At 2.95 percent, Thai banks' nonperforming loan ratio isn't worrisome. However, restructured loans are turning bad rapidly. Should there be many other borrowers in the same boat as Pace, lenders' credit costs might see unexpected spikes.
It might require a strong cup of java, but investors need to wake up to the risk that 2018 may not be the banner year they're expecting for the likes of Siam Commercial Bank Pcl, Krung Thai Bank Pcl and Tisco Financial Group Pcl.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.