PTTEP Plans Thailand’s First Dollar Perpetual Since 2006Katrina Nicholas and Tanya Angerer
PTT Exploration & Production Pcl is marketing the first dollar-denominated perpetual bond for a Thai company in eight years as borrowing costs hold near the lowest in 12 months.
Thailand’s biggest publicly listed oil and natural gas explorer, known as PTTEP, is offering the securities with no fixed maturity to yield about 5.25 percent, a person familiar said. The notes are callable at par after five and 10 years, and then every distribution payment date. The last Thai issuer of perpetual notes was Krung Thai Bank Pcl, which raised $220 million selling 7.378 percent debt in October 2006, according to data compiled by Bloomberg.
Average dollar bond yields for Thai companies touched 4.42 percent on May 29, the least since June 2013, and were at 4.48 percent yesterday, JPMorgan Chase & Co. indexes show. Rates declined even as the army took control and imposed martial law. Thailand’s National Council of Peace & Order yesterday lifted a curfew imposed in more than 20 provinces on May 22 following the coup. Easing political tensions should boost economic momentum, the Bank of Thailand said.
“Issuers are looking to do perpetual bonds because of the lower all-in funding costs, and to benefit from the partial equity classification of such securities,” said Avanti Save, a Singapore-based credit strategist at Barclays Plc. “The political situation in Thailand has limited impact on the fundamentals of Thai corporates.”
Thailand’s economy will start to recover this quarter, and gain further momentum in the third, as local demand revives and exports show positive signs, Don Nakornthab, a director for the central bank’s macroeconomic policy, told reporters in Bangkok yesterday.
U.S. currency notes in Thailand have returned 5.48 percent year-to-date, more than Vietnam at 5.44 percent, Malaysia at 4.25 percent and Singapore at 3.97 percent, HSBC Holdings Plc indexes show. Dollar bonds in Indonesia have gained 11.64 percent.
Companies in Thailand have also successfully tapped the international debt capital markets throughout the nation’s latest political upheaval. Siam Commercial Bank Pcl and Kasikornbank Pcl sold a combined $1.1 billion of five-year notes in April, days after elections were annulled, bringing the amount of dollar bonds issued so far this year to $1.7 billion.
GS Caltex Corp., a Seoul-based oil refiner, is also planning to sell dollar notes, marketing $400 million of five-year securities at about 160 basis points more than Treasuries, another person familiar with the matter said, asking not to be identified because the details are private.
“We see fair value at Treasuries plus 135 basis points,” Kingston Lam, a Hong Kong-based analyst at Credit Agricole CIB wrote in a report today. GS Caltex’s 2018 bonds are trading at a spread of 137.18 basis points, Bloomberg-compiled prices show. Moody’s Investors Service cut the company’s rating by one level to Baa3 in February.
Banco do Brasil SA is offering additional Tier 1 perpetual notes to yield about 9 percent, another person said. Latin America’s biggest lender by assets can buy back the subordinated Basel III-compliant debt after 10 years.
Perpetual securities typically pay higher yields to compensate investors for their having no fixed maturity date. Companies meanwhile are allowed to treat them as equity on their balance sheets.
Thai Airways International Pcl is considering its first offshore bond sale, and hired Barclays Plc and Citigroup Inc. last month for the planned offering. The nation’s biggest carrier may sell dollar perpetual notes to broaden its funding sources, Raj Tanta-Nanta, the vice-president of corporate finance, said in a May 6 phone interview.
Greenko Group Plc, an Indian alternative energy project developer, is also planning dollar debentures and may raise as much as $400 million, people familiar with that matter said today.
The cost of insuring corporate bonds against non-payment in Australia and Japan fell. The Markit iTraxx Australia index dropped 0.25 basis points to 80.25 basis points as of 10:45 a.m. in Sydney, Citigroup prices show. That’s on track for its lowest close since April 2010, according to data provider CMA.
The Markit iTraxx Japan index slid half a basis point to to 68 as of 9:51 a.m. in Tokyo. The measure is poised to fall 4 basis points this week after a drop of 6.4 basis points last week, the biggest decline since the five days ended Feb. 21.
In Asia, the Markit iTraxx Asia index of credit-default swaps gained 1 basis point to 100.5 basis points as of 8:46 a.m. in Singapore, according to Australia & New Zealand Banking Group Ltd. prices. The index rose 1.3 basis points yesterday, increasing for the first time since May 27, CMA data show.