THE Credit Guarantee and Investment Facility (CGIF) has assisted Siamgas and Petrochemicals Public Company Limited (SGP) of Thailand to access the Thai baht bond market through a guarantee, representing its first support to a Thai corporate issuing bonds in local currency.
SGP is tapping the market for two billion baht (US$63.65 million) for five years with a coupon of 3.03% per annum. CGIF is providing a partial guarantee of 85% to help the company reach conservative institutional investors as a means of raising long-term funds at a fixed rate through the bond market.
Although the Thai baht bond market is one of the most efficiently-priced across the Asean region, many institutional investors, including pension funds and insurance companies, continue to have a strong preference for highly-rated bonds. As such, CGIF notes that companies rated below the preferred rating threshold, even if investment grade, will find it difficult to access the market.
In supporting SGP, the transaction also represents CGIF’s first guarantee to a liquefied petroleum gas (LPG) distributor. LPG is an essential source of fuel to many low to middle income consumers. In some rural areas in the Asean+3 region, especially those served by SGP, there is still considerable use of biomass for cooking. CGIF’s support for the use of LPG is in line with the principles of encouraging a more environmentally-friendly source of energy.
In tapping the Thai baht bond market, SGP managing director Supachai Weeraborwornpong says the company always explores new financial instruments to strengthen its financial position. “With the CGIF guarantee and A-rated bonds, SGP can access institutional investors and raise long-term funds,” he says. “SGP hopes that as the first Thai company to issue a Thai baht fixed rate bond under the CGIF guarantee, our transaction could encourage other Thai companies to consider it as an alternative fund raising.”
In providing the guarantee to SGP, CGIF CEO Kiyoshi Nishimura hopes the transaction will pave the way for SGP to secure Thai baht bond investors’ confidence and exposure to the company in the future. “CGIF’s aim is to assist creditworthy companies to access institutional investors’ funds in the region with the support of our guarantees and eventually based on their own strength,” he says.
United Overseas Bank (Thai) and Krung Thai Bank acted as the joint bookrunners and lead managers for the transaction.
CGIF is a multilateral facility established by Asean+3 (China, Japan and Korea) and the Asian Development Bank. As a key component of the Asian Bond Markets Initiative, CGIF was established to develop and strengthen local currency and regional bond markets in the Asean+3 region.
Established in 2001, SGP operates LPG storage, terminal and filling plants as well as operating with dealers for LPG filling plants and LPG stations throughout Thailand. It has overseas operations in China, Vietnam, Singapore, Malaysia and Myanmar.
Photo: Peter Hellberg / Wikimedia
