Mar. 20--Krungthai Card Plc (KTC) plans to raise 7.74 billion baht in new funds to pay debts in order to reduce its debt to equity ratio and establish confidence among creditors, says the company's president and CEO, Niwatt Chittalarn.

The KTC board of directors approved a management plan to reducing registered capital from 2.58 billion baht to 2.57 billion baht yesterday by cancelling its existing registered unsold shares.

It then approved an increase in registered capital to 10.31 billion baht by issuing new ordinary shares at par value of 10 baht apiece to mobilise around 7.74 billion baht in new capital.The newly issued shares will be offered to the company's existing shareholders, as a rights offering, at a ratio of one existing share to three new shares.

Mr Niwatt said that if shareholders subscribed to all the new shares, the company's debt-to-equity ratio would decline to 2.5 times from 7.4 times currently. If the subscription is only half of the total new shares, the ratio would be reduced to 4.2 times -- a satisfactory level to build creditors' confidence.

"Under our base assumption, we believe we will achieve 50 percent [of new share sales] for the recapitalisation. The rights offering priced at 10 baht per share is higher than the market price at around 7 baht, which would affect subscriptions," he said, adding that the company's book value stands at 23 baht per share.

"The amount [of the rights issue] is too big and the offering price too high," Sasikorn Charoensuwan, an analyst at Phillip Securities, told Bloomberg. "With the slowing economy we expect it to have a weaker performance this year."

The bearish stock market will likely affect response to KTC's offering. However, the company still likes its timing, thanks to signs of life in the US stock market. If the recapitalisation were made later, after the market bottoms out, it would be too late, Mr Niwatt said.

Part of the proceeds will be used for short-term debt payments, totalling 12.60 billion baht, accounting for 30 percent of the company's total debt of 42 billion baht. Short-term debts of around 3 billion baht will be due in the second half of the year. Proceeds will also be used for expansion after KTC positive trends the first two months of the year.

KTC, the country's leading credit card marketer with a card base of 1.6 million, booked total card spending of 14.3 billion baht in the first two months or 6.97 percent growth year-on-year.

The company is more focused on higher-income cardholders, those who earn at least 35,000 baht per month, and is more prudent on loan approvals during the weak economy. The Bank of Thailand requires a minimum salary of 15,000 baht per month per cardholder.

KTC shares closed yesterday on the SET at 7.30 baht, down 0.85 baht, in trade worth 25.3 million baht.

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