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Treasury & Capital Markets
Why liability management will become more important in 2017
Predicted to grow in 2017, liability management in the Asia-Pacific region is something frequent bond issuers need to consider going forward.
Darryl Yu 3 Jan 2017
Predicted to grow in 2017, liability management in the Asia-Pacific region is something frequent bond issuers need to consider going forward. “Liability management in our view is going to be an increasingly important theme in the markets. The stock of bonds out there is now so significant considering that we have had US$200 billion of issuance per annum in Asian G3 for a good amount of time plus heavy issuance in Asian local currencies,” states a fixed-income banker from an international bank.
Already in 2016 we have seen several issuers such as the Republic of the Philippine embark on their own liability management exercises. Last February, the sovereign conducted an accelerated 1-day switch tender offer for 16 series of US dollar bonds maturing from 2016 to 2037.  
Even high-yield issuers last year were involved in liability management deals. Sritex, an Indonesian-based garment manufacturer, was part of an any-and-all tender offer targeting the company’s existing US$270 million senior guaranteed notes due April 2019.
It wasn’t all US dollar deals last year. Asian local currency liability management was fairly active as well. The Kingdom of Thailand Ministry of Finance last summer performed a Thai baht bond exchange offer that allowed the sovereign to extend its 2017 maturity tower for medium to long dated securities on the issuer’s curve. “Issuers are becoming significantly sophisticated and looking to what borrowers have been doing in terms of innovative management of their capital structure,” according to the banker. 
The potential growth of Asia-Pacific liability management in 2017 is also supported by a number of callable instruments outstanding in the market. ICTSI addressed their callable instruments last October when the company did a tender offer targeting its outstanding US$300 million perpetual-NC19 and US$450 million perpetual-NC21. The actions carried out by ICTSI and the Kingdom of Thailand are a reminder that future issuers need to carefully consider upcoming redemption and maturity dates to ensure that funds are ready or alternative borrowing options are available.
Supported by a low interest rate environment of the past few years, debt has evidentially flourished across the world. With rates expected to shift in the next several months expect to see more issuers executing debt-restructuring schemes.  
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