Corporates look overseas for innovative solutions

Standard Chartered Bank (Thai) expects the trend of offshore investment by Thai corporates over the next few years will move towards accessing new technology and other innovations to improve business efficiency.

The local unit of the British bank believes Thai conglomerates will increase their focus on businesses overseas that can add in terms of innovative resources and management teams, according to Plakorn Wanglee, senior executive vice president.  

He raised the example of the petrochemical industry, which is looking for innovative operations overseas that could help strengthen its operational bases in Thailand.

Key reasons for Thai direct investment overseas are exploration for the new markets, access to raw materials and natural resources, and increased efficiency.

Standard Chartered’s strong network in 70 markets is an advantage over other banks in providing financial sources, both lending and financial instruments, in the countries that are in the focus of Thai conglomerates, he said.

He said Thai corporates that had exposure overseas required diversified sources of funds besides bank loans. Therefore it was essential for financial institutions to adapt towards loan syndication and funds from equity and capital markets.

Recent deals such as those by PTT Global Chemical (PTTGC) and Thai Oil, which each issued US$1 billion worth of 10-year dollar bonds arranged by the bank, are examples of Thai corporates requiring non-lending facilities to support their international activities.

Plakorn said the bank believed Thai conglomerates would increasingly source funding through debt instruments rather than borrowing because mergers, acquisitions and other kinds of business expansion would require long-term funding, with their costs fixed lower than the floating rates from bank loans.

However, Thai companies still demand bank loans to speed up the process of closing deals before refinancing to long-term funding later on. This will help ensure that the transactions are kept local.

For example, Standard Chartered is facilitating short-term loans to CP All for its acquisition of Siam Makro, after which CP All will restructure its financial sources for long-term debt. The deal is awaiting approval by CP All shareholders soon.

Liquidity in Thailand is sufficient but Thai companies still look for funding from overseas to diversify the sources of funds and their costs, he said.

Plakorn, who joined the bank last November, noted that with its insight into corporate needs, StanChart had refocused its relations managers to provide comprehensive products and strategic solutions to clients.

The bank also categorised five main industries that are more inclined to use the financial market. They are energy, infrastructure and resources; agricultural, food and beverage; telecommunications and electronics; heavy industries and construction; and financial institutions.

The bank estimates that Thai overseas direct investment this year will be higher than the US$11.92 billion (Bt354 billion) recorded last year.

Income from Standard Charted (Thai)’s wholesale banking this year is expected to double last year’s 8-per-cent growth in line with the increased corporate deals.

 

More deals 

The bank has 10 more deals in its pipeline worth more than Bt10 billion, both as lender and bond-issue arranger. 

In the first four months, the bank arranged bond issues for PTTGC, Thai Oil, Krungthai Bank and Kasikornbank, and facilitated lending to Thai Beverage in acquiring Fraser and Neave and an operating lease to Thai Airways International to buy aircraft.

Outstanding loans as at the end of last year were Bt40 billion.