Thai Airways’ turnaround highlights stressed bonds as a wake-up call for market reform

Thai Airways’ remarkable turnaround from a debt-laden crisis to a profitable rebound has become a focal point for Thailand’s broader debt-market reform debate. The national carrier, once buoyed by an image of reliability and service excellence, faced a perfect storm in 2020: a staggering loss tally, deep liquidity strain, and a default on a substantial chunk of bonds after years of mismanagement and pandemic headwinds. The two-year arc from crisis to profit—driven by a bold debt-restructuring plan, sharper customer service, fleet optimization, and disciplined financial management—has turned a once-doubted emblem of national pride into a case study for how a legacy enterprise can redefine its fate. As Thai Airways’ revival garners attention, it has also intensified discussions about how the Thai capital market handles stressed debt more broadly and whether similar opportunities can be extended to other troubled issuers without inviting new risks.

The turnaround is more than a corporate anecdote. It signals that with the right mix of restructuring strategy, governance reforms, and capital-market support, a company teetering on the brink can reorganize, regain access to financing, and return to profitability. Yet for investors and policymakers, Thai Airways’ success raises a critical question: if a flagship airline with substantial legacy baggage can rebound, why shouldn’t the broader market offer comparable second chances to other stressed issuers? The implications stretch beyond aviation. They touch on fundamental questions about how Thailand’s financial system allocates risk, how it prices distress, and how it protects retail investors while ensuring that sound issuers aren’t crowded out by bad actors or regulatory bottlenecks. In short, the Thai Airways narrative has become a litmus test for the resilience and adaptability of the country’s debt market.

In the wake of this turnaround, market observers have begun to reassess the mechanisms by which distressed assets are handled in Thailand. The central dilemma is whether to broaden channels for stressed bonds to change hands and be managed by capable specialists who can restructure, refinance, and ultimately restore value. The logic is straightforward: when a distressed bond is purchased by a firm with the right expertise and incentives, there is a greater likelihood that the debt can be reorganized, the issuer can regain credibility, and the bondholders can recover value—either through improved cash flow, restructured terms, or a complete or partial recapitalization. Yet translating this logic into policy and market practice is proving to be far more complicated than the headline success of Thai Airways suggests.

This article examines the current state of Thailand’s stressed-bond landscape, the two dominant policy ideas that have emerged to unlock value and liquidity, the barriers those ideas face, and the broader market reforms that are necessary to make a durable, inclusive system. It also considers alternative pathways, including hedge-fund participation, and why a more foundational strengthening of the bond market—rather than ad hoc fixes—may be essential to prevent the next wave of distress from becoming a systemic problem. Throughout, the focus remains on preserving investor confidence, safeguarding small and retail investors, and creating a framework that rewards prudent risk management and accountability.

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A rare turnaround and its implications for the bond market

Thai Airways International, in the years leading up to 2020, confronted a perfect storm of structural inefficiencies, mounting debt, and the sudden shock of a global pandemic that paralyzed international travel. Its balance sheet bore the marks of years of underperforming routes, inflated operating costs, and capital costs that outpaced revenue growth. The company’s losses had grown so large that a default on over 71 billion baht of bonds loomed as a real possibility. The magnitude of the loss—more than 141 billion baht—captured international attention and underscored the systemic risks that can accompany heavy-leveraged, constrained-service carriers in a crisis environment.

The story of Thai Airways’ revival is not simply that it recovered; it did so through a combination of aggressive debt restructuring, improved service offerings, and strategic financial engineering that restored access to capital markets. The airline’s management pursued a bold plan that restructured debt maturities, sought more favorable pricing, rationalized the fleet and network, and tightened operating expenses to align with post-crisis demand. Within a two-year window, the airline moved from near-collapse to profitability, a trajectory that surprised most market observers and rekindled debate about the viability of other distressed enterprises in Thailand. The narrative is not merely about one company’s survival; it is a demonstration that well-executed debt restructuring, coupled with operational improvements, can unlock value and restore credibility in a stressed debt scenario.

This turn of events has stirred a broader question about the role of the debt market in enabling successful turnarounds. Specifically, if a high-profile, state-supported carrier can recover, what does that imply for the market’s ability to respond to other stressed issuers that might be in similar debt distress but lack a clear path to profitability? The question invites policymakers, investors, and market participants to consider how to design mechanisms that facilitate timely reorganizations, encourage responsible lending, and prevent a selective rescue of a few high-profile entities while many smaller issuers remain in limbo.

From a practical standpoint, Thai Airways’ revival has underscored the importance of credible restructuring frameworks. It has illustrated how a mix of debt-equity readjustment, improved governance, and targeted operational reforms can re-establish cash-flow resilience. It has also reaffirmed the need for financial-market infrastructure—rating agencies, banks, asset managers, and regulatory authorities—to align incentives, monitor risk properly, and provide a more predictable environment for distressed issuances to be re-priced and reallocated. The case of Thai Airways thus serves as an essential data point in debates about whether to expand channels of debt trading, to create new investment vehicles that can absorb distress, and to sharpen the tools available to regulators and market participants to prevent another collapse of this scale.

In light of Thai Airways’ experience, stakeholders are examining two principal approaches to handling distressed debt in Thailand. The first focuses on modifying the law to permit asset-management companies to broaden their mandate to include stressed bonds. The second explores the creation of a dedicated Stressed Bond Fund (SBF) through new SEC rules designed to attract institutional and ultra-high-net-worth investors to invest specifically in stressed debt. Each approach carries potential benefits, but both face significant practical and regulatory hurdles that must be addressed before they can yield the intended outcomes. The remainder of this article delves into these approaches in depth, clarifies the obstacles, and outlines a path toward a more resilient and inclusive bond market that can support both corporate turnarounds and prudent investor protection.

The two pathways in play: amending AMCs and launching a Stressed Bond Fund

Thailand currently relies on asset management companies (AMCs) to purchase non-performing loans from banks. Under existing law, AMCs have a defined, narrow mandate: they can acquire bad loans, but they are not empowered to purchase stressed bonds. A group of market participants believes that extending AMCs’ remit to include stressed bonds could create a robust, enterprise-level mechanism for re-pricing, restructuring, and managing distressed debt, potentially unlocking liquidity and averting cascading failures across multiple sectors.

The drive to amend the Asset Management Company Act of 1998 to explicitly incorporate stressed bonds into the category of “bad loans” being eligible for AMC purchase rests on a straightforward logic. If an AMC can step in to purchase distressed loan assets, allowing it to purchase stressed bonds could reduce the time-to-restructure and provide a credible pathway for issuers facing near-term liquidity crises. The Thai Bond Market Association (ThaiBMA) has advocated for this change as a practical solution to a market where demand for distressed debt remains fragmented and where traditional credit channels may be slow to respond to evolving risk profiles.

However, the central bank—the Bank of Thailand (BOT)—has expressed caution about broadening the AMC mandate to include stressed bonds. From its perspective, expanding AMCs’ purchasing authority could drain liquidity reserves allocated to banks where the funds are needed most to shore up lending and maintain financial stability. The BOT fears that letting AMCs buy stressed bonds could undermine bank liquidity cushions and increase systemic risk if the rapid sale of distressed debt results in sudden shifts in market demand or price distortions. The central bank’s concern is not merely about liquidity but about the potential knock-on effects across the broader economy, including credit availability for small businesses and households.

The market data on stressed bonds provides a crucial context for these debates. ThaiBMA data show that stressed bonds accounted for a tiny share of the corporate-bond market in 2023—about 0.9% of all outstanding corporate bonds. This figure suggests that even if the AMC mandate were expanded, the scale of the market exposed to such a change would be limited. Yet policy-makers and market participants argue that even a small expansion could create important signaling effects, improve liquidity conditionality around distressed names, and offer a more predictable exit path for investors who must price high-risk assets. The question remains whether the potential benefits justify the risk and the regulatory complexity of expanding the AMC mandate in a way that preserves financial stability and avoids unintended consequences.

The second major pathway is the development of a Stressed Bond Fund (SBF) backed by the Securities and Exchange Commission (SEC). The proposed framework envisions asset management companies creating mutual funds specifically tailored to investing in stressed bonds. These funds would then be sold to institutional investors and ultra-high-net-worth individuals seeking high-yield opportunities in distressed debt. In principle, the SBF would supply a much-needed investor base for stressed bonds, helping to facilitate faster work-outs, better price discovery, and more disciplined risk management for issuers facing distress. The promise of the SBF is clear: create a dedicated, professional market segment where stressed debt can be actively managed, rather than endlessly shuttled through conventional channels with uncertain outcomes.

Yet, the practical realities are sobering. The SEC has proposed a set of rules that would define how these funds can operate, including a significant investment threshold. The current framework requires the fund to allocate at least 60% of its average annual net asset value to stressed bonds. This 60% rule aims to ensure the fund’s core investment focus remains on distress targets, but it also imposes a substantial operational constraint. For asset managers, this requires not only acquiring a steady stream of stressed bonds, but also maintaining a stable risk-adjusted return profile under a mandate that reduces flexibility in asset allocation. Many firms argue that such rigidity makes the fund difficult to run profitably, particularly during market cycles where distressed debt prices do not move in lockstep with general bond-market liquidity.

Additionally, participants have pointed out that the SEC’s framework imposes constraints on how stressed bonds can be managed within the fund. The management style and discipline necessary to optimize recovery—renegotiation terms, asset-revitalization strategies, and timely restructurings—may not align neatly with typical mutual-fund operating models. In other words, the fund’s governance and fee structures must align with the unique demands of distressed-debt management, which differ markedly from those of standard fixed-income funds. This misalignment has created skepticism among many asset managers who say that the rules as written may prevent funds from delivering the outcomes investors expect, or may inadvertently heighten risk for retail and institutional investors who lack the expertise to monitor complex distressed-debt strategies.

There is broad recognition that the 60% investment requirement could be softened to lower barriers to entry and to encourage more fund managers to participate. Advocates argue that easing the investment threshold would allow funds to employ more dynamic risk-management practices and develop diversified portfolios of stressed bonds, potentially smoothing returns for investors who might otherwise be exposed to single-name risk. The central goal is to attract a broader pool of participants who can bring expertise in turnaround strategies, corporate governance improvements, and restructuring processes. Critics, however, warn that loosening the rule could dilute the fund’s focus on distressed debt, enabling managers to drift into less risky assets and thereby compromising the very objective of providing a dedicated lifeline to stressed-bond issuances.

Despite these debates, a fundamental challenge remains: even if the SEC loosens certain requirements or if the AMCs gain authority to purchase stressed bonds, would these measures address the core drivers of distress in Thailand’s corporate-bond market? The data suggest a limited immediate impact from mere changes in purchasing rights or fund mandates if the underlying market structure remains fragile. The problems extend beyond who buys stressed bonds to include fundamental questions about the incentives governing debt issuance, the quality of financial disclosures, the accuracy of risk pricing, and the adequacy of corporate governance in issuers. Without addressing these root causes, changes to procurement channels may provide a temporary fix while leaving the system vulnerable to the next wave of distress.

The debate thus hinges on balancing three objectives: enabling more efficient and credible management of distressed debt through professional buyers, ensuring that any expansion of AMCs’ mandate or new fund structures does not undermine financial stability or create inappropriate moral hazard, and preserving the integrity of the market so that retail investors and small institutions are protected from mispricing and mismanagement. In other words, these pathways must be designed with a clear, forward-looking view of how they will interact with broader reforms that strengthen the bond market’s foundations, rather than acting as isolated adaptations to a single problem.

The limits of the current framework: what’s missing in practice

Even as discussions continue around AMC amendments and a dedicated stressed-bond investment vehicle, several critical gaps in Thailand’s current framework hinder the effectiveness of any distressed-debt program. These gaps are not purely theoretical; they translate into tangible constraints on liquidity, price discovery, investor protection, and the rate at which issuers can recover value from distressed situations.

First, there is a notable absence of reliable, forward-looking default indicators for high-risk bonds. Without transparent, timely signals about rising risk, investors have limited ability to anticipate distress and adjust portfolios accordingly. The absence of standardized, objective metrics makes it harder for market participants to converge on a consistent view of risk, price, and recovery prospects. This is a problem not just for those who hold high-yield bonds, but for the entire market because it complicates risk management, hedging, and capital allocation decisions. The development of clear default indicators would provide a shared framework for monitoring risk across sectors and issuers, enabling earlier interventions and better alignment of incentives among borrowers, lenders, and regulators.

Second, governance and issuer responsibility in the Thai bond market require stronger, more enforceable rules. The market needs a robust set of standards that ensure issuers have credible plans and the ability to repay debt. This includes more precise requirements for financial reporting, audit quality, and governance practices that reduce the likelihood of misrepresentation or mispricing of risk. Stricter accountability measures would not only deter fraudulent or negligent behavior but also support more accurate pricing of risk in the bond market. If issuers know that misalignment between stated capacity to repay and actual cash flow could trigger penalties, borrowings may be more disciplined, and investors may gain greater confidence in the market’s resilience.

Third, there is a need to enhance transparency in how companies raise money through the bond market. The process by which bonds are issued, rated, and subsequently traded should be accompanied by rigorous disclosures about risk exposures, liquidity profiles, and the use of proceeds. Greater transparency would assist investors in making informed decisions and reduce information asymmetries that can fuel mispricing or misallocation of capital. A more transparent funding landscape would also help regulators monitor systemic risk more effectively, enabling swifter responses when warning signals emerge.

Fourth, there is a broader question about who should participate in the market to manage distressed debt and how to prevent moral hazard. While hedge funds and specialized asset managers bring expertise in restructuring and turnarounds, they operate under different regulatory constraints than mutual funds and banks. The TDRI’s research into the role of hedge funds suggests that specialized buyers can contribute to the resolution of distressed debt by stepping in during downturns, restructuring, and unlocking value. However, integrating hedge funds into Thailand’s risk management framework requires careful study. The heterogeneity of hedge-fund strategies means that a one-size-fits-all approach is unlikely to work. Policymakers would need to assess the appropriate types of strategies, the level of oversight, and the potential market impacts before inviting these players to operate in the country’s debt market with any broad mandate.

Fifth, the broader macro context matters. A more resilient bond market cannot rely solely on ad hoc fixes; it needs to be embedded in a strong macro-financial framework that supports stable interest rates, credible fiscal policy, and a robust regulatory environment. If distress events occur at scale, the market must have the capacity to absorb them, reprice risk, and maintain confidence among a wide range of investors. A resilient market will require ongoing reforms that align incentives across the financial ecosystem, from banks and asset managers to regulators and the issuers themselves.

In this light, any meaningful reform must address not just liquidity and trading channels for distressed debt, but the entire ecosystem that creates, prices, and repays debt. The path forward involves a combination of enhanced data and analytics, stronger governance and disclosure standards, a calibrated role for AMCs and new funds, and a measured, evidence-based approach to allowing additional buyers into the distressed-debt space. The objective is not simply to rescue individual bonds or issuers, but to build a system that anticipates distress, manages risk, and protects everyday investors who rely on the bond market for income and stability.

A deeper look at hedge funds as potential catalysts for change

Drawing lessons from overseas and domestic analyses, the Capital Market Regulatory Guillotine team at the Thailand Development Research Institute (TDRI) has highlighted hedge funds as one of the most capable categories of buyers to manage distressed debt. Hedge funds typically operate with a lighter regulatory touch relative to mutual funds and have the flexibility to pursue more aggressive downside strategies during market downturns. Historically, when markets have contracted and prices for distressed bonds have plunged, hedge funds have often stepped in as buyers of last resort, acquiring debt at reduced prices and using sophisticated restructuring techniques to reprice, renegotiate, or replace debt with more sustainable arrangements.

There is a straightforward appeal to introducing hedge funds as a cornerstone of Thailand’s distressed-debt strategy. They bring a set of capabilities that are particularly well-suited to the needs of a market in distress: active balance-sheet restructuring, hands-on involvement in governance reforms, and a willingness to take on risk for potentially outsized returns when properly managed. In theory, hedge funds could help to bridge the gap between banks that want to de-risk and investors who require attractive yields with a clear path to recovery. The improved allocation of distressed assets could, in the long run, foster more efficient pricing of risk, better capital allocation, and a more robust mechanism for preventing a cascade of failures in the corporate sector.

However, there are still important caveats. The introduction of hedge funds into Thailand’s distressed-debt ecosystem would require a careful, evidence-based approach to risk management, regulatory oversight, and market impact analysis. Hedge funds employ diverse strategies, ranging from event-driven restructurings to opportunistic asset acquisition and complex securitization techniques. Each strategy comes with its own risk profile and governance requirements. Regulators would need to determine which strategies align with Thailand’s financial stability objectives, how to supervise these activities, and how to ensure that participation does not create loopholes that allow bad actors to exploit the system.

Moreover, there is no universal guarantee that hedge funds will rescue every distressed bond or that they can be uniformly deployed to prevent future distress. The heterogeneity across funds means there is a need for rigorous due diligence, standardized disclosure practices, and a framework that ensures that risk controls and liquidity planning are central to any participation. Policymakers should undertake targeted pilots or phased introductions to assess the real-world impact of hedge-fund participation in Thailand’s debt market. If such pilots demonstrate tangible benefits—recovery of value for distressed bonds, improved price discovery, and stronger corporate governance in distressed issuers—they could justify broader adoption. If not, the regulatory apparatus should be prepared to adjust or halt any expansion and pivot toward other tools.

In the end, while hedge funds can be a powerful piece of the puzzle, they are not a silver bullet. The TDRI’s work suggests that while hedge funds can be part of a broader toolkit, a more comprehensive approach is required to address structural gaps in the bond market. That approach should combine clear risk indicators, stronger governance, enhanced disclosures, and a calibrated role for specialized buyers, including hedge funds, AMCs, and dedicated funds, within a framework designed to preserve market stability, protect small investors, and support high-quality debt recovery processes. The aim is to ensure that any introduction of non-traditional buyers improves resilience rather than introducing new sources of volatility or moral hazard.

Foundational reforms: building a more resilient bond market

Even with the potential benefits of AMC amendments, Stressed Bond Funds, and hedge-fund participation, the broader objective remains strengthening the bond market’s foundations. The current approaches are valuable, but they address symptoms rather than root causes. What Thailand needs is a systemic upgrade of the bond market that improves default detection, risk pricing, execution of distress strategies, and investor protection. This involves a multi-pronged strategy that may include the following elements:

Clear default indicators and early-warning systems: Establish standardized metrics and transparent dashboards that policymakers, regulators, issuers, and investors can use to identify rising distress. Such indicators should be based on objective financial data, cash-flow visibility, liquidity coverage, debt service capacity, and forward-looking stress testing. The goal is to provide timely alerts that enable preventive actions, renegotiations, and proactive interventions before bonds slip into distress.
Stricter eligibility and eligibility oversight for high-risk bonds: Define robust criteria for the kinds of issuers and debt instruments that can access stressed-debt mechanisms. This includes credible business plans, realistic revenue and cash-flow projections, governance reforms, and enforceable penalties for non-compliance. The risk is that without clear eligibility standards, distressed debt strategies could drift into opportunistic territory, undermining investor confidence and market integrity.
Enhanced disclosure and issuer accountability: Require more transparent disclosures regarding use of proceeds, debt-service profiles, liquidity cushions, and exposure to market shocks. Strengthen corporate governance and stewardship rules to deter misrepresentation and ensure that issuers can meet debt obligations or that clear, enforceable remediation plans exist.
Transparent and robust enforcement: Develop regulatory tools that enable swift action when issuers fail to comply with their fiduciary responsibilities or misrepresent their financial position. This includes faster penalties, clearer consequences for fraud or mismanagement, and mechanisms to deter reckless risk-taking that could destabilize the market.
Market structure improvements and investor protection: Create a more inclusive market that protects retail investors and small institutions while enabling sophisticated buyers to participate in distressed-debt strategies. This includes enhanced suitability standards, better education for retail investors, and stricter controls on conflicts of interest among intermediaries, rating agencies, and fund managers.
Stronger governance around new market instruments: When introducing AMCs with expanded mandates or specialized funds like the Stressed Bond Fund, implement governance provisions that ensure independent oversight, performance transparency, and accountability for performance against stated objectives. Funds should be expected to demonstrate demonstrable value creation in distressed situations and to manage risk with clarity and prudence.
Data-driven policy evaluation: Establish a framework for ongoing assessment of reforms’ effectiveness. Use data to measure liquidity, price discovery, default rates, recovery values, and investor protection outcomes. Adjust policies in light of empirical evidence to ensure that reforms deliver the desired resilience without creating new vulnerabilities.

These foundational reforms would complement targeted instruments like AMC amendments, SBF rules, and hedge-fund participation. Taken together, they would move the discussion from a debate about piecemeal fixes to a comprehensive, long-term strategy for a more resilient, transparent, and fair bond market. The objective is not merely to avert a crisis when distress appears but to anticipate stress, provide pathways for constructive reorganizations, and ensure that all stakeholders share in the gains when a distressed issuer is successfully rehabilitated.

Practical considerations for implementation and timelines

Translating these concepts into real-world policy and market practice will require thoughtful sequencing, stakeholder engagement, and careful risk management. Several practical considerations should guide any reform path:

Phased implementation and pilot programs: Before broad adoption, regulators could run pilots to test AMC expansions or SBF operation with clearly defined success metrics and exit strategies. This would enable policymakers to observe real-world impacts, gather lessons, and adjust rules accordingly.
Clear sunset and review clauses: Any expansion of AMCs’ mandates or the introduction of SBFs should include explicit sunset provisions and periodic reviews. This ensures that authorities can reassess the program’s effectiveness and avoid perpetuating policies that do not deliver value or cause unintended harm.
Oversight, governance, and independent reporting: Strengthen the governance frameworks for AMCs and SBFs, including independent oversight bodies, transparent reporting, and third-party audits. Transparent, credible reporting will be essential to maintain investor confidence and market integrity.
Stakeholder education and risk communication: Develop educational resources for investors—retail and institutional—about distressed debt, risk factors, and the goals and limitations of new instruments. Clear communication about risk, liquidity, and potential returns will help protect investors who may lack specialized expertise.
Coordination across regulators: Ensure that securities regulators, central banks, and financial supervisory authorities coordinate policy design and enforcement. In a market with interlinked institutions—banks, asset managers, issuers, and investors—coherence in policy aims and enforcement guidance is critical to preventing regulatory gaps and conflicting signals.
Data and technology investments: Invest in data infrastructure and analytics capabilities to monitor distressed debt markets, track performance of new funds or AMCs, and enable rapid responses to emerging risks. A data-driven approach is crucial to identify early warning signals and to assess the effectiveness of reform measures.
International benchmarking and learning: While the Thai market has its own dynamics, learning from international experiences with distressed debt markets, AMC expansions, and special funds can provide valuable insights. An approach that combines local context with proven best practices could improve the odds of success.

A path forward: building resilience, protecting investors, and fostering growth

The Thai Airways turnaround demonstrates what can be achieved when a distressed enterprise receives focused support and a credible path toward profitable operation. The broader implication for the country’s bond market is that orderly, well-structured reforms can unlock value from distressed debt, improve market liquidity, and bolster investor confidence. Yet the journey from a crisis-ready framework to a durable, risk-sensitive system requires a holistic, multi-stakeholder approach that addresses both symptoms and root causes.

The proposed avenues—AMC mandate expansion, a dedicated Stressed Bond Fund, and the potential involvement of hedge funds—offer meaningful potential tools. They must be pursued with careful attention to the lessons of history, the specifics of the Thai market, and a rigorous commitment to market integrity. The ultimate objective is to create a bond market that can absorb distress without propagating systemic risk, that can enable credible turnarounds for viable but distressed issuers, and that can protect ordinary investors who rely on fixed-income markets for savings and income.

As policymakers and market participants chart the way forward, the focus should remain on three core outcomes: timely risk detection, effective and enforceable governance, and sustainable market resilience. With these in place, the Thai bond market can evolve from being reactive to distress to becoming a proactive system that promotes responsible investment, supports credible turnarounds, and sustains confidence across cycles.

Everything hinges on a shared commitment to reform that matches ambition with disciplined execution. The Thai Airways example provides a concrete aspiration: when a troubled issuer is given the right tools, governance, and market support, recovery is possible. The question for Thailand’s financial system is whether it can translate that single-success story into a durable, scalable framework that benefits a broad spectrum of issuers, investors, and the economy at large. If the answer is yes, then Thai Airways may be remembered not only for its revival but for catalyzing a comprehensive upgrade of the country’s debt-market architecture—an upgrade that could protect households, empower businesses, and strengthen the nation’s long-term financial stability.

Conclusion
The Thai Airways turnaround underscores the potential for disciplined debt restructuring and operational improvements to restore profitability after a slide into distress. It also spotlights the larger challenge confronting Thailand’s bond market: how to create channels, rules, and incentives that enable credible turnarounds for stressed issuers while protecting investors and maintaining financial stability. The two principal policy paths—the expansion of asset-management company mandates to include stressed bonds and the establishment of a dedicated Stressed Bond Fund—offer promising avenues, yet they must be implemented with caution, accompanied by stronger market foundations, robust risk indicators, stricter governance, and enhanced disclosure. Hedge funds could play a constructive role, but their participation must be carefully designed and regulated to avoid unintended consequences.

Ultimately, the path forward requires a coordinated, data-driven approach that strengthens the bond market’s infrastructure and governance, improves risk detection and management, and aligns incentives across all market participants. Only through real teamwork—between regulators, banks, asset managers, issuers, and investors—can Thailand build a bond market that is both resilient in the face of distress and capable of supporting legitimate, value-driving turnarounds. If pursued thoughtfully, the lessons from Thai Airways can help transform stories of distress into systemic resilience, ensuring that the next wave of stressed bonds is managed with a strategy that protects investors, rewards prudent risk-taking, and sustains long-term market growth.