In addition, the 1997 Asian Financial Crisis severely damaged the project. The exchange rate, which stood at 25 Baht per US dollar at the time of contract signing, had increased to 40 Baht per US dollar in 2000, reflecting a 60 percent depreciation of the Baht.36 Consequently, the BTSC liabilities had increased by 60 percent. This devaluation of the Baht, coupled with the inaccurate ridership forecast, resulted in an inadequate debt service coverage ratio (DSCR) for the project.
There are a number of strategies to manage currency risk and BTSC could have mitigated this asset-liability currency mismatch had there been some financial instruments put in place. For example, hedging arrangements could have been set up to allow the project company to benefit from project security, although in exchange for an increase in the cost of debt.
Due to these prevalent problems, BTSC eventually defaulted on its principal payments in 2002 and went into discussions with creditors over its debt restructuring plans, followed by a business rehabilitation filing with the bankruptcy court in 2006. However, BTSC was released from business rehabilitation in October 2008 after completing the rehabilitation plan approved by the court. Within half a year, the company made its first profit in March 2009.37