Frontier Markets Issue: Hattha Bank’s Bt1.5bn 2025 bond

IFR Asia Awards 2022
2 min read
Kit Yin Boey

Pioneering trade

Hattha Bank made its first leap into the offshore debt market in October, securing a place in history as the first Cambodian issuer in the baht-denominated debt capital market with its Bt1.5bn (US$39.5m at time of issuance) 4.7% three-year bond.

“Although Hattha Bank is a new name and the first Cambodian issuer to tap the Thai debt capital markets, the order book was healthy with a good mixture of investors from asset management companies to life insurance companies,” said Oknha Hout leng Tong, Hattha Bank’s chief executive officer.

While the deal size was modest, the impact of the transaction was great, as it opened up a new funding route for Cambodian borrowers.

Casino operator Nagacorp is the only Cambodian name to have sold bonds in the US dollar market. The country’s borrowers have otherwise stayed onshore, but the domestic bond market is still at an early stage.

Hattha Bank’s key goal in seeking to raise funds overseas was to build its presence and name recognition outside of Cambodia, and to diversify its funding sources. The bank also sold Cambodia’s first bond in December 2018 – a CR120bn (US$29.3m) 8.5% three-year note.

The Cambodian bank provides retail services and lending to micro, small and medium enterprises in sectors such as agriculture, wholesale and retail, construction, services and food processing.

Hattha Bank is wholly owned by Bank of Ayudhya and previously relied heavily on funding from its parent and multilateral agencies, but it has set an ambitious goal to reduce its dependence on these sources.

There were challenges to overcome during the baht deal, which was marketed to institutional and high-net-worth investors. Investors had to warm to a debut name from another country at a time of heightened international political tensions and global policy rate rises.

The issuer and its sole lead manager Bank of Ayudhya brought a group of key investors to Phnom Penh to better understand Cambodia’s macro-economic outlook and conducted a series of virtual roadshows with Hattha Bank’s top management.

Parent Bank of Ayudhya is majority owned by Japanese banking giant MUFG, helping Hattha Bank and its baht-denominated bond earn BBB+ ratings from Tris, in line with Cambodia’s BBB+ sovereign rating.

Demand was healthy from real money accounts with the deal 1.13x oversubscribed. Asset managers took 53% and life insurance companies 47%.

With a foot firmly in the Thai market, Hattha Bank will be able to access a broader range of funding sources, and has opened the door for more Cambodian issuers to follow.

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