PTT Launches Century Bond

BUSINESS

PTT launches century bond

By ACHARA DEBOONME

THE NATION

PTT will put its Bt4-billion 100-year bond issue for subscription on Thursday, considering it good timing to affirm institutional investor confidence in the group following a review by credit-rating agencies.

"All the bonds should be sold out, with 90 per cent going to insurance companies," chief financial officer Tevin Vongvanich said during an interview yesterday.

PTT, Thailand's largest oil and gas company, initially planned to raise Bt3 billion, but the issue size was expanded following the overwhelming interest during book building. The bonds due in 2110 offer 5.9 per cent coupon rate per annum. Siam Commercial Bank, Kasikornbank and Bangkok Bank are the financial advisers.

To Tevin, this affirms strong institutional investor confidence though PTT and its key subsidiary PTT Exploration and Production (PTTEP) are subjected to Moody's Investors Service credit reviews following the subsidiary's massive Bt66.8-billion investment in an oil sands project in Canada and a licence review in Australia due to the Montara incident. Standard & Poor's, meanwhile, is also reviewing PTTEP's credit rating on concerns of huge capital expenditure.

He is convinced that the review results will not affect the cost of funding, given that Moody's rating for PTT is higher than the sovereign rating. "Despite concerns over the leverage, we're proceeding as planned. The oil sands project will boost PTTEP's supply in the long term."

The proceeds will become part of PTT's funds for its long-term investment plans, which includes the acquisition in Straits Resources - a deal that should be concluded in February.

Being the first in Thailand and probably in Asia to issue the century bonds, which were highly popular in the US in the 1990s, PTT also aims to set the benchmark for the entire group.

"The issue is denominated in Thai baht as we want to test the waters. We could launch later issues in foreign currencies if we witness positive demand," he admitted.

"We're not in dire need of funds, though. Rather, we want to set the long-term benchmark for the entire group. Plus, 100-year bonds were popular among big firms and governments to lock in low interest costs. Meanwhile, investors are searching for high-yield investments in an extra low interest rate environment," he added.

Fitch Ratings (Thailand) last week assigned a AAA(tha)/(stable) for the 100-year senior unsecured debentures.

After a flurry of deals with 100-year tenors in the 1990s following their introduction, the century bond lost its shine for some time. Its popularity is back this year. In the past two months, US railroad Norfolk Southern raised US$250 million (Bt7.55 billion) in September, Rabobank $350 million and the Mexican government $150 million.

-- The Nation 2010-11-29