New Nordic Thailand: Update May 22 – Rehabilitation process

Interview with Don McBain
Proposed to be the Plan Preparer for New Nordic Development Co Ltd (“NND”)

What is your background?
I am a business reorganisation and financial restructuring specialist. With a background which includes property development and engineering design and construction, I have been working in business reorganisation in Thailand since the Asian financial crisis in 1997. I has been involved in the restructuring of hundreds of companies through a range of industries, from transportation, construction, hospitality, property development, manufacturing, heavy industry and telecommunications. Debts in some of those companies has ranged from small amounts to hundreds of millions of dollars and in some has neared USD 2 billion. I have more than 20 years’ experience in the Thai legal system dealing with business reorganisation under Thailand’s Bankruptcy Act.

What is your position in NN?
I was appointed a non-executive director of NND in June 2021. My appointment was for the purpose of my being nominated as joint Plan Preparer for the business reorganisation of NND as specified under Section 90 of the Bankruptcy Act of Thailand. My introduction to NND was made consequent to my reputation and experience in business reorganisation and prior to my appointment, I had not had any involvement with NND nor had I ever met any of the company’s management either current or past.

We heard you have been here since October, have you already started some work, if yes, what does it consist of exactly?
At the time of my appointment, I was in Australia, having been there since 2020 consequent to the COVID-19 pandemic. I arrived back in Thailand at the beginning of October and was introduced to NND after 14 days in quarantine.

My immediate tasks were to come to understanding the corporate arrangements of New Nordic Group of companies, to learn of the projects undertaken, and most importantly to become familiar with the liabilities of NND, and specifically the liabilities to the persons and entities that had invested in NND condominium products. I also introduced myself to all creditors’ lawyers and made myself available for discussions with these persons whenever requested.

We understand May 2022 hearings are for objections, can you try to give us a better idea of the possible next steps?
The Court hearing into the application for business reorganisation has been set down for May 2022. The hearing will start and be conducted continuously until finished. 10 days has been set aside by the Court for that process.

Assuming the application is successful and the Court orders NND into business reorganisation, the order of the Court will be published in the Government Gazette and all creditors (including customers owed money) will be notified by the Legal Execution Department of the order and will have one month to lodge their claim with the Legal Execution Department. After lodgement, the Legal Execution Department will assess all claims and determine the debt that is owed at the time NND is ordered into business reorganisation. Concurrently, the Plan Preparer will prepare a Plan of Business Reorganisation which must be completed within three months.

Once the Plan of Business Reorganisation is completed all creditors will be invited to attend (in person or by proxy) a meeting chaired by the Legal Execution Department to decide if the Plan is acceptable. If the majority of creditors accept the Plan, it will then be sent to the Bankruptcy Court to consider the Plan. That process will take approximately two months. It is important to note that the Court reviews the legality of the Plan, not its commercial terms as these are determined by the creditors within the constraints of the law as set down in the Bankruptcy Act.

In my opinion, if NND does not enter business reorganisation, the likely outcome is that NND will be adjudged bankrupt which will have a significant adverse and detrimental impact on many of NND creditors.

In the best case, when do you think about being able to present a finalized plan to creditors?
My experience is that it takes nearly the full three months to prepare a Plan of Business Reorganisation as it must comply with the criteria set down in the law. The law allows two extensions of one month each, in case the Plan Preparer cannot complete the plan within the designated 3 months. In the case of NND, I do not anticipate any extensions will be required. Therefore, subject to the Court’s schedule, I expect a Plan to be completed within 2022.

Should people rather expect some kind of 1 time refund (either full or partial) or some kind of split payment over the year? Best case, which year could they expect a first payment (whatever the amount is)?
It is premature to determine how the debt of creditors will be treated. It depends on a number of issues which include:
(a) the final debt determined by the Legal Execution Department
(b) the amount of money that can be generated by NND during the post-COVID recovery of the tourist market
(c) any new investment that may be able to be secured for the business
(d) the amounts of monies able to be generated by the disposal of non-core assets
(e) options that may be proposed to creditors for their choice in how their debt may be treated.
As a general objective, however, payments to creditors in respect of debt under the Plan would commence within the year after the Plan is approved by the Court.

In respect of whether debt is serviced by a one-time payment or a split of payments, it is highly unlikely that NND will have the capacity to satisfy all creditors with a once off payment. I do envisage, however, that alternatives in respect of this may be included as part of the options for debt treatment, the selection of which will be the choice of individual creditors.

Will the proposals be individual or will there be proposals depending on the group of situations (example: completed and transferred rooms / completed and not transferred/ under construction / not started?) 
Whilst each of the creditors has the right to vote on the Plan according to the level of their debt as determined by the Legal Execution Department, the law sets down that:
• Creditors who are secured under their contracts by a lien over the assets of NND are treated as one class
• Creditors who are unsecured can be divided into different classes according to the type of creditor they are. For example, government creditors are generally classified in a group of their own. Similarly, so are financial institution creditors.

Investors in the condominium projects will also likely be divided according to the state of their debt. The Legal Execution Department will review the classifications to ensure their legality and acceptability by the Court. Within each group, however, all creditors must be treated equally. It is prohibited to do a deal with any individual creditor within the same class, other than within the options that are provided within the Plan and approved by the majority of creditors.

Will the plan contain alternative proposals for investors to choose from or will it be only one proposal to vote for or against? Will there be a “consultation” phase when investors / lawyers can make comments?
There can only be one Plan. However, within that Plan we will endeavour to provide options for some specific creditor groups to settle liabilities, as we recognise that individual creditors may have individual circumstances that will cause them to prefer one option for debt settlement over another.

The meeting of creditors is where creditors and their lawyers can make comments on the Plan and request amendments to the Plan. This will necessarily require the majority of creditors to want the specific amendments. Other than that, there is no specific consultation phase as the three-month Plan preparation period is very time constrained. Nevertheless, practically speaking the Plan Preparer will be listening to creditors on an informal basis prior to finalising the Plan because it is in the interest of creditors and the Plan Preparer that an acceptable Plan of Business Reorganisation be submitted to the meeting of creditors.

Can NND make adjustments, before the voting process?
NND as the debtor does not have any rights of amendment to the Plan of Business Reorganisation under the law in respect of the Plan of Business Reorganisation.Notwithstanding, the Plan Preparer will consult with NND management as a matter of course for the purposes of collecting data and information and evaluating the business opportunities and processes.

Can the vote be divided in groups – ex . plan for Phtechaburi / plan for Castle … or will it be necessary for 1 vote for all NND creditors?
The Plan of Business Reorganisation cannot be divided on the basis of projects. All creditors are a creditors of NND and as such have access to all the assets of NND which must be used for the purpose of settling all the liabilities of NND. As discussed above, however, the treatment of creditors can vary between classes dependant on the nature and status of the associated debt.

Do you have any say on ” non Rehab ” developments?
I do not have any say on any other company within the New Nordic Group within Thailand or overseas and I do not have detailed knowledge of the status of those other companies. I am a non-executive director of NND only. I believe it likely, however, that if other companies within the group are in similar financial status to that of NND, the management of those companies will be monitoring the process and outcome of the business reorganisation of NND.

Do you have an opinion on the New Nordic Group general situation?
I do not have an opinion of New Nordic Group general situation. The situation is what it is and I cannot do anything to influence the past. My sole objective is to focus on the future of NND and to develop a Plan of Business Reorganisation for NND that enhances the financial return to its creditors.

For a creditor who is currently objecting to NND being ordered into business reorganisation, I recommend discussing with your lawyers and advisors the likely outcome for that individual creditor should the application for business reorganisation be rejected and NND be bankrupt. Certainly, by law, a creditor’s return must be not less than if NND were to be adjudged bankrupt.

For those creditors who are currently objecting to NND being ordered into business reorganisation and for whom the bankruptcy of NND has insignificant impact, as the proposed Plan Preparer, I request that creditor consider the plight of the other creditors for whom the consequences of bankruptcy is very significant.