More Thai corporates to tap US-dollar markets

Author: Ashley Lee | Published: 19 Oct 2012
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PTT Global Chemical’s (PTTGC) listing of $1 billion senior unsecured notes on the Singapore Exchange is the largest single-tranche US dollar bond offering by a Thai corporate.

Earlier this year its affiliate, major Thai corporate PTT Public Company which has an interest in innovative financial instruments, became the first non-financial institution in Thailand to issue a hybrid.

Although Thai financial institutions have been very active in the bond market, PTTGC’s issue late last month signals Thai coprorates’ interest in US-dollar denominated bonds.

“For Thai credit, what set the PTTGC deal apart is that most of the other September deals involved financial institutions: Bangkok Bank did another issue following an issue two years ago, Siam Commercial Bank tapped its existing bonds and Kasikornbank tapped its MTN programme,” said Posit Laohaphan, counsel at Latham & Watkins who represented PTTGC.

But PTTGC’s short corporate history posed a challenge to the offering. The company was formed via the amalgamation of PTT Chemical Public Company and PTT Aromatics and Refining Public Company, which completed in October 2011.

Latham & Watkins partner Timothy Hia said that counsel had to pull together a coherent discussion on the company’s track record to give investors a good sense of its business, and what it is looking at going forward.

Because the company had just been formed, there was a focus on appropriate presentation of its business and strategic direction, Laohaphan said. Although PTTGC’s predecessor companies had tapped the capital markets, this time was a fresh process.

Moreover, the US-denominated bonds required disclosure in accordance with rule 144A. Viroj Piyawattanametha, partner at Baker & McKenzie who advised PTTGC on Thai law, said that most of the complications involved the disclosure requirements.

More complex instruments ahead

This year has been a banner year for Thailand’s bond market. Deal counsel predict issues similar, as well as more complex instruments ahead..

Piyawattanametha said that the firm has been in discussions with a number of corporates and they are very interested in launching international issues.

“If the international interest market is still in favour of the issuers, I expect more and more Thai companies will tap US markets, especially because infrastructure demands in Thailand mean that Thai project owners need US dollars,” he said. “One of the easiest ways to obtain US dollars is of course to issue US-dollar denominated bonds.”

Laohaphan agreed that as long as conditions for investment-grade debt issuances remain favourable, names that have already been in the market will continue to participate. However he noted that there are opportunities for newer names as well.

Although the markets are quickly developing, today only a few Thai companies have the capacity to issue innovative instruments. Hia said that he expects more offerings by companies of the scope and scale of the PTT Group.

“PTT is one of the corporates with the profile and business to be looking at more complex structures, although the market is still relatively new when it comes to this sort of deal,” he said. “Larger corporates are better equipped to navigate some of the issues that come with complicated structured issues.”