The Credit Guarantee and Investment Facility (CGIF), a multilateral facility established by Asean members, China; Japan, and Korea (which collectively form Asean+3), and the Asian Development Bank, continues to support the development of the local currency bond market in the region, helping more issuers to access the debt market. This includes extending the first guarantee for a Vietnamese dong project bond and its longest tenor to date since commencing operations in 2012.
Thailand’s vertically integrated food producer Thaifoods Group Public Company Limited (TFG) became the latest recipient of the CGIF guarantee, enabling the company to raise two billion baht (US$66.07 million).
The five-year bonds, issued on January 8, were the first such transaction by a Thai company under the Asean+3 multi-currency bond issuance framework (AMBIF) – a policy initiative under the Asian Bond Markets Initiative to standardize the bond and note issuance processes with the goal of strengthening bond market linkages between the Asean+3 countries.
The 100% credit-wrapped bonds were assigned a “AAA” rating by Thai credit rating agency TRIS Rating, which allowed TFG to place the bonds to domestic institutional investors. The bond proceeds will be used for the sustainable growth of TFG’s animal feed mill business.
TFG CEO Winai Teawsomboonkij says the CGIF guarantee helped TFG to achieve optimal cost of fund and strengthen its strategic advantage by supporting its long-term business plan and providing them access to Thai institutional investors at the right time. “TFG hopes to see other companies to follow our initiative bond issuance under AMBIF and consider CGIF guarantee as an alternative structure,” he adds.
CGIF CEO Guiying Sun notes the transaction demonstrates CGIF’s continuing support for the development of the Thai bond market. “As a first AMBIF issuance by a Thai company in the Thai bond market, this transaction improves the region’s overall bond market system through promoting AMBIF,” she says. “The framework eases the bond issuance process, especially for those bond issuers having region-wide operations to tap flexibly diverse bond markets in the region.”
United Overseas Bank (Thai) acted as the sole bookrunner and lead arranger for the transaction. TFG specializes in the production of chicken, swine and feed mill with operations in Thailand and Vietnam.
Its business focuses primarily on the production of chicken, and live pigs for sale to brokers, retailers, slaughterhouses, industrial and modern trade companies, export/re-export agents and the export market.
CGIF also continue to assist Vietnamese issuers in their fundraising in the local currency bond market. Last December, in a first deal of its kind, CGIF granted its maiden guarantee for a dong project bond, illustrating its continuing commitment to promote renewable energy and infrastructure project bonds in Asean.
The guarantee was for Hong Phong 1 Energy Joint Stock Company, which issued on December 24 a 2.15 trillion dong (US$92.78 million) bond for 15 years and a 400-million-dong amortizing project bond for five years.
The bonds were placed privately and were supported by cash flows that comes from the Hong Phong 1A solar power project located in Bac Binh district in Binh Thuan province with an installed capacity of 195MWp/150MWac owned by Hong Phong 1.
The project, which achieved commercial operation on June 8 2019, is one of the first – and one of the largest – utility scale solar projects developed under the government policy issued in April 2017 to promote solar power project in Vietnam.
Under the 20-year power purchase agreement with the national utility company EVN, the solar power generated by the project will be sold to EVN with a fixed power selling price at a competitive rate.
Alongside the 15-year and five-year project bonds, ING Bank (Singapore) was a joint lead in the deal as a co-financier, providing a seven-year project finance loan for US$30 million, as well as sole international adviser for the bond transaction. Vietcombank Securities Company acted as a bond issuance agent.
Being the first renewable energy project bond in Vietnam, CGIF says this transaction is expected to help in diversifying the available funding sources for infrastructure projects in the country. Given the vast financing needs for infrastructure development in Vietnam, CGIF also says that the importance of domestic institutional investors as a stable source of long-term local currency financing is expected to increase over time.
Sun notes that while project bonds have been widely used for the financing/refinancing of renewable energy projects in developed markets, it is still uncommon in the Asean region due mainly to bond investors’ unfamiliarity with this new asset class. “Hence, CGIF’s catalytic role as a credit enhancer would be crucial during the initial stage of development of the project bond market,” she adds.
In another deal, CGIF guaranteed the bond offering for Vietnam Electrical Equipment Joint Stock Corporation (Gelex) amounting to 1.15 trillion dong issued on December 31. This was the 11th bond that CGIF has guaranteed in the dong market, totaling US$691 million in equivalent.
Gelex is a listed and publicly-traded diversified business group in Vietnam operating two key business sectors: industrial production and infrastructure. In industrial production, Gelex’s electrical equipment production and sales maintain the leading position in the Vietnamese market.
For infrastructure development, Gelex has become a pioneer in the renewable energy industry with its solar and wind power projects, beside a wide range of commercial and industrial real estate projects.
Sun says the transaction, arranged by Standard Chartered (Vietnam), furthers the promotion of renewable energy sources within Vietnam by introducing a new source of debt capital funding for Gelex.
“The transaction has not only matched the long-term funding requirements of Gelex, but has also enable the efficient deployment of capital to a solar project, which advocates the sustainable development of energy resources within the country,” she points out.