Rates view sees queue for debenture issues
A GROWING number of major companies listed on the Stock Exchange of Thailand plan to issue debentures this year to maintain cash flow and fund their investment budgets as they believe that interest rates are likely to increase late in 2017.
Thai Oil shareholders on April 7 agreed to plans to issue US$1 billion worth of debentures between this year and 2022. President and chief executive officer Atikom Terbsiri said recently that the company was preparing for interest-rate rises in the second half of this year.
Siam Cement Group intends to issue debentures worth Bt25 billion this month, partly to replace an existing debenture that is expiring, and also to raise funds for the group’s business expansion this year.
SCG has set aside an investment budget of Bt70 billion this year, president and CEO Roongrote Rangsiyopash said recently.
Meanwhile, Amata B Grimm Power SPV 1 Co also plans to issue debentures, worth Bt11.5 billion, for business expansion this year.
Charn Issara Development aims to issue a three-year debenture worth Bt500 million, also for business expansion this year, with a targeted interest rate of 4.8 per cent per annum.
Power Line Engineering plans to issue a two-year debenture worth Bt500 million offering interest of 6.25 per cent per annum. The bond issue will be open to investors from April 28 to May 3.
The Thai Bond Market Association (ThaiBMA) believes long-term debenture issuance this year will amount to around Bt600 billion, of which Bt320 billion will be refinancing of existing debt while around Bt120 billion will be issued by banks. Long-term-debenture maturity this year will amount to around Bt308.77 billion, it says.
ThaiBMA president Tada Phutthitada said early this year that the upward trend of interest rates could alter the demand of some investors compared with previous years because they have more choices and could see just as good returns from long-term as from short-term bonds.
As a result, many corporates plan to issue long-term debt to cut their business costs due to rising interest rates. Meanwhile, maturation of short-term debentures in the Thai bond market will amount to Bt260.34 billion this year.
Last year, new long-term-bond issuance hit a record of Bt812.98 billion, up by 37 per cent from 2015, dominated by the banking, property, and energy and utility sectors.
But large mergers and acquisitions in 2016 made the commerce sector a newcomer among long-term bond issuers. The commerce sector alone last year issued long-term bonds worth Bt122 billion, of which Bt80 billion to Bt90 billion was by Berli Jucker.
The bond market in 2016 expanded by 7.23 per cent to Bt10.85 trillion from Bt10.12 trillion in 2015.
