Krungthai Bank Moves Hybrid Bond Price To 220 Millions

[Jai Dee]

Krungthai Bank moves hybrid bond price to 220 millions after overwhelming interest from foreign investors

Foreign investors are reserving hybrid bonds of Krungthai Bank at higher prices than projected. The hybrid bonds will help boost the confidence of financial institutes.

Mr. Apisak Tantiworapong (อภิศักดิ์ ตันติวรวงศ์), the Krungthai Bank Managing Director, spoke about the sales of hybrid bond, or the fusion of debt and capital printed document. He said foreign investors offered their prices through the branch in Singapore yesterday, adding that they were overwhelmingly interested and the reserved rate was more than the bank had expected.

Consequently, the bank has decided to raise the price from 200 million US dollars to 220 million US dollars to hold up the demands. The interest rate is 7.378 percent per year, which is lower than the previous rate in the Road Show last month.

Mr. Apisak said most foreign investors who bought hybrid bonds last time are still purchasing the bonds this time round, and some of them have offered higher prices. This has shown that investors from abroad still believe in the stability of Thai politics.

Moreover, if Krungthai Bank is more successful in selling hybrid bonds, other financial institutions will be more confident in doing so.

Source: Thai National News Bureau Public Relations Department - 06 October 2006

[ColPyat]

This has shown that investors from abroad still believe in the stability of Thai politics.

The question though is: are these foreign investors from all over, or just from mainland China?

[Jai Dee]

Merrill completes Krung Thai bond

The deal is upsized and prices at the tight end of initial guidance.

Merrill Lynch completed the revived perpetual non-cumulative tier-1 offering for Krung Thai Bank in solid fashion last night, with an upsized deal that priced at the tight end of initial guidance.

The new deal, completed less than a fortnight after its original was withdrawn following Thailand’s coup, is a $220 million perpetual priced at par with a coupon of 7.378%, equating to a spread of 280bp over 10-year US Treasuries. advertisement

Merrill had gone out with a guidance of 280bp to 285bp over US Treasuries, which was 15bp to 20bp wider than that of the original $200 million deal. The wider spread was generally seen as an add-on for investors for the inconveniences incurred in the previous deal.

Indeed, the deal is clearly investor friendly, and if Krung Thai was looking for absolution, they got it. When the order book closed early Thursday evening, it was oversubscribed by two times and a total of 50 accounts had been allocated paper. Of those 50 accounts, 75% were investors who had bought into the earlier deal.

If the retention of the initial investor base is a strong signal that the deal was handled correctly, the fact that the deal is already trading markedly tighter with a bid/offer spread of 272bp to 275bp over is a glowing endorsement.

Although some in the market were circumspect that the timing was a little too premature, Merrill can pat itself on the back for making the most of an unfortunate situation. The deal’s timing looks sound. Treasuries rallied in sessions ahead of the deal, and then bonds retreated shortly after Krung Thai placed as early Thursday trading in New York digested a poor weekly jobless report.

At the same time, Thai five-year credit default swaps have regrouped over the last two weeks, having pushed out to between 65bp and 74bp from 32bp and 36bp following the coup. They are now sitting at around 40bp to 45bp.

Ultimately the success of the Krung Thai deal should provide some damage control for the Thai credit markets, which were left in flux following the coup. The bond deal is the first to emerge from Thailand since the military took control and proves that, at least on the debt side, the country is open for business again.

The Krung Thai paper was sold primarily to Asian accounts which took 75% of the deal. The remaining 25% went to Europe-based accounts. Funds bought 65% of the bonds, banks took 29%, and public banks took the remaining 9%.

Source: FinanceAsia.com - 6 October 2006