“The bonds are expected to go on sale on October 14 with Citibank acting as underwriter, while KBank cannot buy back the bonds until the five-year term is up,” added the source.
The source speculated that the move aimed to increase the bank’s tier-1 capital to tackle non-performing loans (NPLs), which are expected to increase after the Bank of Thailand’s automatic debt suspension programme ends on October 22.
“KBank is now ranked Baa1 (stable) by Moody's Investors Service while Standard & Poor's ranks their credit score as BBB+ (negative),” said the source. “Meanwhile, the bank’s NPL is currently at 3 per cent, but the debts in the special mention group (1-3 months behind in payment) are at 7-8 per cent. Issuing the perpetual bonds is therefore a pre-emptive measure to keep NPLs under control.”
The source also added that issuing perpetual bonds would entail a lower cost than issuing ordinary shares, as currently investors’ interest in bank’s shares is declining due to increasing NPLs, prompting banks to give around 30 per cent discount on their ordinary shares, or provide up to 10 per cent interest.
Published : October 12, 2020
By : THE NATION