Teesside, a gritty steel-making district in England's northeast, is almost as far removed as you can get from the steamy streets of Bangkok.
The two collided last week to inflict the biggest default on Thai bankers since the Asian financial crisis.
Sahaviriya Steel Industries Plc, the Bangkok-based operator of Southeast Asia's largest flat-steel manufacturing complex, reneged on 50 billion baht ($1.4 billion) of loans Monday following the failure of its four-year old UK venture. The group said it was suspending production at the Teesside plant, which employs about 2,000 people, amid a drop in prices and a supply glut stemming from slowing economic growth in China.
BIGGEST DEFAULT SINCE TPI DURING 1997 CRISIS
Thailand's biggest default since Thai Petrochemical Industry (TPI) failed with $3.8 billion of liabilities during the 1997 Asian crisis looks set to reduce earnings at Siam Commercial Bank, Krung Thai Bank and Tisco Financial Group, which combined had extended most of credit.
As they negotiate a restructuring, the three leading creditors to the company will take a hit to their current quarterly earnings that could, in the case of Tisco at least, wipe out any profit entirely...
Sahaviriya Steel over-invested in the UK and steel prices went down continuously from there. They used too much debt because they couldn't issue enough equity and bonds at that time. Now they have to find new partners to survive.
The company itself blames the economic slowdown at home in Thailand as well as the global steel glut caused by China dumping vast quantities of steel on the global steel market causing prices to fall 63% from a May 2008 all-time high to the lowest since at least 2003...
BANKS ALREADY SET ASIDE PROVISIONS, NO EFFECT ON FINANCIAL STABILITY
If all of Sahaviriya Steel's debt becomes non-performing loans (NPLs), bad loans in Thailand's banking system would rise to 2.86% from 2.46%, says the Bank of Thailand (BOT), this would be the highest level of NPLs since July 2011.
However, according to the BOT, "this will not affect the stability of