PTT Global braves tough market
Bonds Thai issuers defer deal launches as asset managers preserve cashBY KIT YIN BOEYPTT GLOBAL CHEMICAL restored
some confidence to Thailand’s
bond market with a Bt15bn
(US$458.8m) four-tranche deal
last week, even as shrinking
liquidity forced other Thai issuers
to postpone major bond sales.
The leading Thai chemical
producer turned to the local
market after plans for a US
dollar bond offering in early
March were thwarted by choppy
financial markets, only to find
Thai asset managers preserving
cash amid turmoil in the local
fund management industry.
PTTGC priced seven, 10, 12
and 15-year bonds at 2.60%,
2.99%, 3.29% and 3.50%.
Demand was sufficient to
cover the targeted maximum of
Bt15bn, but this might well be
the last publicly marketed deal
for the next few weeks, said
bankers on the deal.
Among those that havepushed back launch plans
are PRUKSA HOLDING, which was
scheduled to bookbuild a
Bt4.5bn bond with joint leads
Kasikornbank and UOB Thailand last
Friday, and WHA, which was due
to market Bt4.8bn of notes this
Wednesday through Kasikornbank,
Siam Commercial Bank and UOB
Thailand.
CP ALL, which has over Bt12.2bn
of bonds maturing in June and
October, has also held back plans
for a bond offering via joint
leads Bank of Ayudhya and Siam
Commercial Bank.
“It is not easy to do deals now,”
said a syndicate banker. “Investor
appetite has changed and it is all
due to worries over the Covid-
illness and its impact across the
world.”
Thailand’s mutual fund
industry has been rocked by the
closure of four global bond funds
managed by TMBAM Eastspring
in late March. Spooked by the
collapse in overseas investment-grade bonds, Thai investors
withdrew some Bt78.5bn from
the four funds from March 1-24,
causing their combined assets to
shrink by up to 70% and forcing
TMBAM Eastspring to liquidate
the funds.
While the rush for
redemptions was confined
mainly to TMBAM Eastspring’s
funds, it prompted some mutual
funds to halt redemptions in
fixed-income funds, and other
asset and fund managers pulled
back from new investments.
To restore some stability
to the market, the Bank of
Thailand, the Finance Ministry
and the Securities and Exchange
Commission of Thailand created
a mutual fund liquidity facility to
support the financial system.
An uneasy calm thereafter
opened a tight window for
PTT Global Chemical. Demand
turned out to be better than
expected thanks to a strong
presence of co-operatives, whichwere attracted by the long
tenors.
“The results are good for PTT
Global, and good for the industry- the deal shored up some
confidence in the market,” said a
banker on the deal.
The issuer, locally rated AA+
by Fitch, still had to pay up. The
10-year tranche yielded 150bp
over Thai government bond
yields, only 10bp less than the
160bp that Berli Jucker, rated
three notches lower at A+, paid
for a 10-year 2.43% note in mid-
March.
Nevertheless, PTT Global’s
foray into the baht market
resulted in cost savings. The
2.99% yield on the 10-year
tranche would be equivalent
to 3.5% in US dollar post-swap
terms, but the Thai company,
rated Baa2/BBB+ (Moody’s/S&P),
would still have to pay a large
new issue premium if it sold
a dollar bond under current
conditions.
Bangkok Bank, Bank of Ayudhya,
Kasikornbank, Krungthai Bank, Siam
Commercial Bank and Standard
Chartered Thailand were joint lead
managers.
Downgrades begin to mount
Bonds: Default risks rise as Covid-19 pandemic adds to refinancing pressureBY DANIEL STANTONDowngrades mounted across
Asia Pacific in Q1 as the
coronavirus epidemic weighed
on economic growth forecasts
and exposed the frailties of
companies across a wide range of
industries.
There were 79 downgrades
from the three major rating
agencies in the region during
the first quarter, according to
Refinitiv data. This is the highest
number since Q1 2016, another
quarter in which commodities
prices slumped.
S&P downgraded 27 corporate
issuers in the first quarter, with
eight apiece from China and
Australia, and cut ratings for one
financial institution and three
insurers. Only three corporate
issuers were upgraded, as well asfour banks and one insurer.
The trend was already
downward before the
coronavirus spread, with 26
corporate downgrades from S&P
in Asia Pacific in the last quarter
of 2019, compared with three
upgrades.
Fitch downgraded 15 issuers
from Asia Pacific in the first
quarter, including five from
China, three from India and two
from Indonesia. It upgraded the
offshore ratings of three issuers
from the region.
Fitch lowered the outlooks
to negative for 14 issuers, and
raised outlooks to positive for
seven others.
It also has negative sector
outlooks for all 17 banking
sectors in the region. On Friday,
the agency downgraded
Kasikornbank, Bangkok Bankand Siam Commercial Bank
from BBB+ to BBB.
“This highlights our
expectation that the global
coronavirus pandemic will have
wide-ranging effects on the
region that will adversely affect
bank performance in 2020 and
into 2021,” wrote Fitch on March
20.
It warned that weaker
economic growth will curb
demand for credit and bad loans
will increase, while investment
banking revenues are likely
to suffer because of market
volatility, which will also impair
banks’ holdings of securities.
Fitch said that it expects
China’s economic growth rate
in 2020 to drop below the 4.2%
figure used by the People’s Bank
of China as a “severe” scenario
in its stress tests. “Under thatscenario, a number of Chinese
banks would be falling short of
minimum prudential capital
requirements,” wrote Fitch.
Moody’s warned in mid-
February that the corporate
default rate across Asia Pacific
was likely to rise to 2.4% in 2020
from 1.1% the previous year. In
Q1, it cut several Chinese and
Indonesian high-yield corporates
to Triple C on heightened
refinancing risks.
Moody’s cut China Logistics
Property Holdings and Chinese
developer Tahoe Group, as well
as Indonesian property developer
Alam Sutera Realty, miner Bumi
Resources and tyremaker Gajah
Tunggal, to Caa1 from B3.
It cut Tianqi Lithium’s
corporate family rating to Caa
from B2 and the rating on its
dollar bonds to Caa2 from B2,
while property developer Xinhu
Zhongbao saw the rating on its
dollar bonds lowered to Caa
from B3, and its corporate family
rating lowered to B3 from B2. International Financing Review Asia April 4 2020 7For daily news stories
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