* Sovereign to create benchmark for Thai issuers
* Plans to make regular offshore forays
* Foreign bonds would avoid overloading local investors
By Neha D'Silva
May 6 (IFR) - The Kingdom of Thailand is preparing to do its
first fixed rate public dollar bond in the offshore market since
1997 and now plans to be a regular issuer, Chularat Suteethorn,
the director general for the Public Debt Management Office told
IFR in an exclusive interview.
"We have plans to go to the international capital market
since we think that it is our job to see that the Kingdom of
Thailand is present in the international capital markets and we
should have the benchmark for the private sector," Suteethorn
Thailand last issued dollar bonds in 2006, a small US$200m
floating-rate private placement that Standard Chartered led. The
sovereign has not issued fixed rate dollar-denominated bonds in
the foreign public market since 1997.
Suteethorn justified the change of heart after such a long
absence by indicating that the sovereign needs to create a
benchmark for other Thai issuers planning to go to the dollar
market. "After this, we plan to issue regularly in the capital
markets. It is our job to make sure the Kingdom of Thailand is
present in the international capital markets at all times."
However, going to the offshore market also addresses a
concern of local bankers and issuers. Thailand was faced with
large funding needs to finance reconstruction efforts after
severe floods in 2011. Given the sovereign's exclusive reliance
on the local markets, there were concerns that all the liquidity
would be drained into sovereign bonds.
By going abroad, the Kingdom would avoid drawing all of the
local funding available to itself. "Since we have plans to
invest both in water management and logistic infrastructure in
the next seven years, amounting to Bt2trn (US$67bn), we also
have to see the opportunity to tap money from outside (Thailand)
and to have the plan ready in case there is some crowding out in
the domestic market," Suteethorn said.
Despite the clear plans, the sovereign's debt management
officials were still in early stage discussions with bankers. No
request for proposals had been circulated so far.
Suteethorn said the debt office was considering five-, 10-
and 30-year bonds, but no decision had been made about the
tenors of planned fundraisings.
"We have to see all possible options and which one is
appropriate for using the money and appropriate for our
portfolio and being the benchmark," Suteethorn said. "It's still
under study, so no decision yet; we have to monitor and follow
the capital markets carefully before making any decision."
Suteethorn said the sovereign is still considering the
timing of a bond offering. "(We have) not set any timeframe for
the issue (but) it is planned for this calendar year," she said.
Suteethorn said that, even though the sovereign is looking
at the foreign markets, there is no shortage of local capital
available. "The liquidity in the domestic market is quite ample,
so we can tap the domestic financial market at a very good
rate," she said.
In fact, the funding official said the Bt1trn the government
needs this year is expected to be raised mostly in the local
market. Of that, some Bt300bn will be the result of an expected
budget deficit and some Bt350bn will be to fund a water
In addition, the sovereign is developing new funding options
in the local market. "We are studying zero-coupon bonds and
different kinds of retail savings bonds," Suteethorn said. "We
used to issue different kinds of savings bonds for retail
investors (some featuring) step-up interest. This we may issue
again, apart from the straight interest rate savings bonds," she
Besides that, Suteethorn said Thailand may extend its
inflation-linked curve to 20 and 30 years by 2015. In January,
Thailand issued a Bt40bn 15-year inflation-linked local bond
that priced with a coupon of 1.25% and extended the linker curve
beyond 10 years for the first time.
(Reporting By Neha D'Silva; Editing by Christopher Langner)