(Sends to additional subscribers)
* Thailand approves first cross-border issue from neighbouring frontier market
SINGAPORE, May 14 (IFR) - Yoma Strategic Holdings is poised to become the first company from Myanmar to sell bonds with a baht-denominated offering that underlines Thailand’s appeal as a regional funding hub.
“Yoma will be the first Myanmar entity to tap the Thai bond market, and they will come before the sovereign, which is nowhere ready to tap yet,” said a Thai government official.
The diversified company is among four foreign companies that were given permission in early May by Ministry of Finance’s Public Debt Management Office to sell bonds in Thailand and to take the proceeds abroad.
The other three are repeat borrowers EDL-Generation and Export-Import Bank of Korea, and Malaysia’s Malayan Banking, a new credit to the Thai market. All four have until January 31 2019 to sell the bonds.
“Thailand has developed initiatives to promote itself as a hub for financing and investments in the region, where you can issue baht bonds to the domestic market and are allowed to take the funds offshore,” said Yoma’s chief financial officer JR Ching. “That is an interesting development for Yoma to support our future growth in Myanmar.”
Yoma, advised by Twin Pine Group, is finalising the transaction but has not mandated any bank yet on the deal, which will materalise only if pricing and market conditions conform with its targets.
If completed, the bond will be the SGX-listed company’s first issuance. Yoma has so far relied on bank loans and equity issues for funding. It raised S$82m (US$61m) last November from a share placement to existing and new investors.
Although listed in Singapore, the company’s assets are mainly in Myanmar, where its interests include real estate, consumer, automotive, agriculture and logistics and tourism-related industries. It is also diversifying into mobile financial services and power production. Its credentials were further enhanced after the International Finance Corporation took a stake in a micro-power joint venture with Yoma and Norway’s state-owned Norfund. NEW RELATIONSHIPS
The company decided to explore a bond offering in Thailand because of the attractive pricing and substantial liquidity in the local market.
“Investors in Thailand are looking for opportunities to diversify their portfolio and historically have been big supporters of Myanmar, so given Myanmar’s proximity and similarity to Thailand, we are keen to explore the opportunity to deepen our relationship with them,” said Ching.
A successful transaction will be a significant positive sign for Myanmar. The country’s domestic bond market is still in its early stages, with no corporate issuance so far. The government in 2016 enacted its Public Debt Management Law, drawn up with the help of the Asian Development Bank, allowing it to issue government bonds under market-driven pricing for the first time.
Myanmar earlier hired Citigroup and Standard Chartered to advise on obtaining an international rating, but there have been no steps made towards an offshore bond deal.
Bankers are also hopeful that the Yoma trade will lead to more Myanmar issuers in Thai baht, mirroring the experience of the Lao People’s Democratic Republic since its debut in 2013.
EDL-Generation is returning to the baht bond markets this year after its last onshore sale in September 2016 of US$312m of seven, 10 and 12-year bonds. Banks have been shortlisted with a mandate expected soon. Twin Pine is sole financial adviser.
The state-owned power producer from Laos is raising funds to acquire certain assets from parent EDL. No other details are available, but a launch is likely towards the end of the second quarter to early in the third quarter.
Another major issuer set to return is Kexim, which will need to refinance a maturing Bt10bn 2.18% three-year bond that was sold in its last visit in September 2015.
The Thai Finance Ministry last month relaxed a two-year ban on the repatriation of funds from issuances of baht bonds, on the condition that the baht-denominated proceeds are exchanged into US dollars on the onshore FX spot market. (This story was first published in the May 12 issue of IFR Asia magazine Reporting by Kit Yin Boey; Editing by Daniel Stanton and Steve Garton)