Malaysia puts brakes on toll plan
Bonds Uncertainty seen as a drag on funding markets for infrastructure projectsBY KIT YIN BOEYInvestors holding M$53bn
(US$13bn) of toll road-related
Islamic and conventional bonds
can breathe a sigh of relief after
the Malaysian government
backed down from its pledge to
scrap highway tolls.
Baru Bian, Minister of Works,
told Parliament on August 13
that moves to abolish tolls had
been put on hold, at least until
the economy improves.
One DCM banker said the
August 13 announcement
pointed to an indefinite delay,
unlike earlier indications that
the delay would be for two years.
The apparent reversal of the
Pakatan Harapan’s pre-electionpledge to abolish tolls lifted
some uncertainties over the
fate of outstanding bonds. But
not all investors are completely
convinced the new government
has shelved the plans for good.
“Optimistic investors are
taking it as a sign it [the removal
of tolls] will not happen,” said
an investor with an insurance
company.
“But I’m cynical - it is just
delaying the inevitable. It will
only prolong the bearish and
uncertain view on the toll road
sector.”
The Malaysia Highway
Concessionaires Association also
struck a cautious tone with a
statement saying only that it was
“committed to work with thegovernment to achieve a holistic
consensus for the benefit of all
parties and the country’s well-
being”.
Bankers say the uncertainties
from the delay will put a drag on
the bond market as companies
involved in toll road projects
could find it hard to access the
debt market for new funding.
At least two toll road
concessionaires have shelved
plans to refinance debt since the
elections. Bankers declined to
name the issuers, but said they
were unlikely to revisit the plans
despite the government’s move
as they were not in urgent need
of funding.
Fears among holders of
toll road-related Islamic andconventional bonds were raised
soon after the May 9 general
election when representatives
from the Pakatan Harapan
government met with
concessionaires and industry
players to discuss the abolition of
tolls in the country.
If tolls are banned across
the country, the impact on the
Malaysian bond market will
be significant given the large
holdings of toll road-related
bonds. As issuers depend
solely on toll revenues to meet
bond principal and interest
payments, banning tolls will
put investors at high risk of
losing their investments, unless
the government steps in to
compensate operators.
Ultimately, such a move would
undermine the development
of the debt capital market,
which has been instrumental in
funding infrastructure projectsThaiBev brews biggest baht bond
Bonds Record deal will have to cope without some abstinent investorsBY KIT YIN BOEYTHAI BEVERAGE is returning to the
baht market with an ambitious
plan to raise at least Bt70bn
(US$2.1bn) in Thailand’s largest
corporate bond issue, just five
months after its latest Bt50bn
financing.
While it found robust
demand in March, the Thai
beer maker’s latest financing
will test the limits of a local
institutional investor base that
is steeped in Buddhism, which
discourages drinking alcohol.
“There will be some
institutional investors which
can take exposure to Thai
Beverage, but we are not
interested in the credit,” said
one investor at a mutual
fund. “Its liquor business does
not comply with our social
and responsible governance
standards.”
The investor said such
compliance became a larger
factor for his fund after the
Securities and Exchange
Commission of Thailandprovided more guidelines last
year to institutional investors
on responsible and sustainable
investment management.
Religion was a major hurdle
for Thai Beverage when it twice
sought to float shares on the
Stock Exchange of Thailand,
before eventually cancellingits plans in the face of intense
protests. The company listed in
Singapore in 2006.
This time around, however,
Charoen Sirivadhanabhakdi’s
drinks giant will not offer the
securities to retail investors,
even though individual buyers
make up as much as half of theThai corporate bond market.
Instead, ThaiBev is leaning
heavily on its seven joint
lead managers to reach out
to institutional investors
and high-net-worth buyers.
Bangkok Bank , Bank of Ayudhya ,
Kasikornbank, Krungthai
Bank , Phatra Securities , SiamNews