BANGKOK. Dec 11: Thailand will likely be disappointed at returns generated by next week's auction of business loans held by 56 shutdown finance companies, foreign fund managers and local analysts said Friday, reports AP.

The auction of 370 billion baht ($10.2 billion) worth of loans on Tuesday is considered

a major step towards restructuring Thailand's shaky financial sector, which is riddled with bad debt totaling as much as 40 per cent of all loans.

Thailand is in the midst of its worst economic crisis in modern times after a failed defense of the country's currency, the baht, last year in which the central bank squandered nearly all its foreign reserves.

Fund managers and analysts told Dow Jones Newswires, however, that while they believe there will be plenty of bidders next week, their offers won't match government expectations. Still, some brave investors could end up with high-risk, high-return loans for prices aslow as 20 cents on the dollar.

"It looks like they will have a lot of participation. Foreign houses are interested in repackaging the assets for resale." said Vana Bulbon of Prudential Portfolio Managers Asia.

But others said failure to push through reforms of antiquated bankruptcy and foreclosure laws, now expected to gain parliamentary approval in March, could drive down both prices and the number of bid-

The auction "has focused people's minds on what is really a huge problem in Asia." said Damien Wood, credit research director at Barclays Capital

Asia Ltd in Hong Kong. "There is no discipline for borrowers, no legal system to support you,"

Thai Finance Minister Tar-rin Nimmanhaeminda has said ar) average return of 20 per cent would be unacceptable. But Montri Chenvidyakarn. Assistant Secretary General of the state Financial.Sector Restructuring Authority, or FRA. said the rehabilitation of the assets is more important than price.

"If we get lower than expected . but acceptable prices, and the investor decides to invest in the economy on a long-term basis, that will offset any losses." Montri said.

Montri also "said, however, that he would not miss the absence of investors who just wanted resell the loans.

The FRA is responsible for the liquidation of the finance companies, closed last year by the government. That move was strongly recommended by the International Monetary Fund, which organized a $17.2 billion economic bailout package for the country.

A secondary market for the resale of the problem loans will be a step forward from the current state of affairs. Assets worth more than 700 billion baht ($19.4 billion) have been frozen for a year and a half since the central bank first suspended the companies operations.