Wednesday, September 30, 2020

Dull debenture market forces property firms to take bank loans, pushing costs up

Jun 26. 2020
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By THE NATION

Property companies are facing problems in issuing debentures in the second quarter, and are having to take loans from banks, which will push up their costs.

Debentures of six property companies – Ananda Development, Land & Houses, Pruksa Holding, Quality Houses, Sansiri, and Supalai – worth a total of Bt23 billion were due for redemption in the second quarter of this year.

Samanun.Polsomboonchok, Capital Nomura Securities’ senior analyst, informed that new debentures worth a total of Bt8.6 billion were issued to repay the ones due for redemption. Bank loans had to be taken to redeem the balance debentures.

“This shows that the debenture market this time is not in a bright situation,” he added, mentioning that using bank credit this way would increase the companies’ cost. However, the cost this time was not that high as the interest rate has come down.

Samanun said that the debentures of three other companies – AP, LPN Development, and SC Asset Corporation – in addition to the earlier mentioned six companies worth a total of Bt67 billion were due for redemption in 2020.

Long-term debentures total Bt51.2 billion, but companies need to pay back Bt22.5 billion in the second half of this year.

Samanun added that the last quarter was of the most concern for those companies, since assistance from banks would reduce, after numerous companies used their financial credits before.

“However, the government can give the property companies a helping hand by buying the investment-graded debentures,” he said.

The debenture market is expected to recover in the first quarter of next year.

Nevertheless, the current situation was not as severe as in 1997, since the interest rate was low and the companies have spread the risk by joining with foreign companies.

The most concerning ones were small companies, because they did not have the financial capacities of the big ones, he added.

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