Thailand Capital Markets Deal: Muangthai’s US$335m four-year social bond
Muangthai Capital’s US dollar bond debut was not only a landmark for the issuer, but also marked the first offshore high-yield deal from Thailand.
The US$335m four-year social bond sold in September was also the first offshore deal from the Thai non-bank financial sector.
Thai offshore issues are generally few and far between, as issuers find more attractive yields in the liquid baht market. But Muangthai sought to diversify its funding, despite the higher costs post-swap.
The non-bank lender started with a one-week roadshow in Singapore, London and Hong Kong in mid-September, ahead of the September 24 pricing, led by sole lead JP Morgan. Bankers took the chance to introduce the issuer to investors and noted that there was ample appetite.
Investors had been keen to buy into emerging market non-bank lenders as a way to take exposure to booming economies through demand for credit creation. Until Muangthai’s deal, investors in Asia had only been offered US dollar paper from Indian non-bank financial companies, creating demand for issuers from other countries.
The company used the Indian NBFCs’ bonds as comparables, although it also needed to explain the differences between the markets. Muangthai, being a Thai-based company that is also family-owned, had to describe its business and reassure investors on disclosure-related concerns.
Indian NBFC Shriram Finance priced a US$500m 3.5-year bond at 99.999 to yield 6.15% on the same day as Muangthai’s social bond, which also had a weighted average life of 3.5 years. The Thai company’s bond was marketed at initial price guidance of 7.25% area, which included an extra cushion to account for the fact that Thailand has a higher household debt ratio than India, while Shriram has marginally better ratings of BB/BB (S&P/Fitch), compared with BB–/BB for Muangthai.
The issuer priced at par to yield 6.875%, close to the market’s fair value estimate of 6.85%.
The deal was nearly five times subscribed, with the order book reaching US$1.6bn from 110 accounts. Asset managers and fund managers were allocated 86%, public investors 7%, private banks 4% and insurers, banks and others 3%.
Proceeds will be used for projects that promote financial inclusion and the reduction of inequality, according to Sustainable Fitch, which provided a second-party opinion on the social bond framework.
The deal’s success has not gone unnoticed, as banks reported more conversations with more high-yield corporates keen to print their first offshore deals, following in Muangthai’s footsteps.
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