Krungthai Card plans to raise Bt20 bn from debentures
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KRUNGTHAI Card, a major credit-card company, will seek shareholders' approval on April 23 for its plan to issue debentures worth up to Bt20 billion to roll over existing debentures and support growth next year.
Chutidej Chayuti, senior executive vice president and chief financial officer, said last week that the Bt30-billion limit for debentures that shareholders had approved three years ago was not enough to finance its business in 2016 because the past two years had greater growth.
It had issued Bt14 billion of debentures in the past few years, leaving it with only Bt16 billion for issuing more debentures.
Refinancing
However, the company plans to issue debentures worth Bt12 billion-Bt13 billion in the second or third quarter to refinance Bt7 billion of maturing debt.
The rest will be reserved for loan expansion in the second half of this year.
“When we issue debentures of Bt12 billion-Bt13 billion, it means we will have remaining Bt3 billion-Bt4 billion, which might not be sufficient to support business next year,” he said.
The coupon rate on the bonds sold over the past three years was 5.5 per cent, while the current interest rate trend should help lower the cost of funds of the company, so the cost of funds this year should be lower.
Last year, KTC’s bonds were rated at “BBB+”, so KTC had a competitive cost of funds.
Bond market growing
Its cost of funds last year was 4.4 per cent, and the recent policy rate cut will help lower that to 4.3 per cent this year.
The bond market continues to grow and demand is high despite the volatility.
Institutional investors, high net worth customers and retail investors have been asking about the next tranche.
The company believes the new tranche will receive a warm welcome from investors.
KTC does not need to respond to the current economic situation together with high household debt by setting aside a special loan loss reserve like it did last year because its coverage ratio is now 374 per cent, higher than the 150-170 per cent of banks.
“Last year, we took a special loan loss provision to defend against unexpected risk if the political unrest had seriously impacted our operations.
“We consider that even with the economic slowdown, the coverage ratio is sufficient to deal with the current situation.
“The non-performing ratio of loans of the credit card business is 1.7 per cent and personal loans is 1.2 per cent. Both are the lowest level in the unsecured loan industry,” he said.
