Part 5: Project finance and domestic fundraising

Chapter 17 Project finance loans from Thai banks

Legal issues A project loan usually comprises a land facility, a construction facility, a working capital facility and a facility for letters of guarantee. The key documents are the term sheet, the facility agreement, guarantees, security and account controls. The legal issues lie in the conditions precedent, financial covenants such as DSCR, LTV, LTC and the Presale ratio, information covenants, negative pledge, events of default and the right to cure a default.

What the developer must do Prepare CP readiness from the term sheet stage: resolutions, permits, equity, security, insurance and a legal opinion. Build a Covenant calendar and run a stress test before accepting the terms. Negotiate the grace period, cure period and definition of events of default to suit the nature of the project. The finance and legal teams should review the compliance certificate together before submitting it.

Key risks Delayed CPs prevent drawdown and may force the developer to take costly short-term borrowing. Cross default, change of control and revocation of a permit can affect the entire facility. Submitting incorrect information is a serious event of default. When there are signs of a Covenant breach, negotiate a waiver before an event of default occurs.

Chapter 18 Security and mortgage registration

Legal issues The main security is a mortgage over the land and buildings, supplemented by an assignment of receivables from sales and rent, insurance, a share pledge and guarantees. A mortgage must be in writing and registered. Condominium units can be mortgaged separately once the condominium has been registered. An assignment of receivables must follow the prescribed form, with proper notice to the debtor. The project account and cash waterfall set the order in which money is applied under the agreement.

What the developer must do Agree the partial release mechanism before transfers open, covering the release price per unit, the procedure and the timing of mortgage discharge, so that buyers receive title free of encumbrances. Set up an account structure and waterfall that the finance team can actually operate. Guarantors should negotiate a cap and the conditions for release of the guarantee, and take advice from their own lawyer.

Key risks A personal guarantee puts personal assets at risk. A corporate guarantee must be supported by authority and a business benefit. If a mortgage is not discharged in time, the customer's transfer day will be affected. A release price that is too high may leave too little cash for taxes and transfer day costs. Check SBT, WHT and fees in the per-unit cash flow simulation.

Chapter 19 Fundraising through the Thai capital market

Legal issues The main instruments are IPOs, REITs, bonds, infrastructure funds, crowdfunding and investment tokens. Each is subject to different rules of the SEC and the stock exchange. A REIT suits assets that generate steady income, not unit-sale projects. Bonds require disclosure and repayment management. An offering to the public must be authorised by law and should not be advertised in the way ordinary property sales are.

What the developer must do Start by checking that the instrument suits the nature of the project's cash flow. Prepare the group structure, related-party transactions, internal controls and financial statements. Appoint experienced financial advisers, lawyers and auditors. Size thresholds, capital, debt ratios and return payments must be checked against the latest announcements. A company that has raised funds must make continuing disclosures.

Key risks The main risks are offering securities without authorisation, incomplete information in documents, related-party transactions, insider information and the refinancing risk of bonds. These can result in fines, prosecution of directors and a loss of credibility. The costs in the original document are estimates; obtain actual quotations.