The first overseas corporate bond from landlocked Laos was always going to be a voyage into uncharted waters. For EDL-Generation, however, the gamble paid off, with a Bt6.5bn (US$181.3m) three-tranche bond, which established a benchmark curve for the country’s corporate sector.
In December 2014, EDL-Gen became the first corporate issuer from Laos to raise funds in the baht debt market. Prior to the EDL-Gen foray, Thai investors were only familiar with the sovereign, as the Lao People’s Democratic Republic had three outstanding bonds totalling Bt10.5bn at that time.
EDL-Gen was a new credit to Thai investors, though its parent EDL is a state-owned entity. The company had previously relied heavily on project financing loans, but was keen to diversify its funding sources. Laos’ undeveloped local market meant it also had no domestic benchmark for investors to use as a pricing reference.
While the success that the Laotian government had enjoyed in Thailand’s domestic bond market gave investors some comfort, EDL-Gen was still looking at a high yield on a standalone basis since a government guarantee was out of the question. To keep funding costs down, EDL-Gen advisers submitted the issue for a rating – a move that the even Laos sovereign had yet to make.
For a first-time issuer, EDL-Gen was quite ambitious. It wanted a diverse investor base, comprising both high-net-worth individuals and institutional investors, and it was going for an issue size of Bt6.5bn – larger than any of the sovereign’s bonds at the time. It also wanted to extend the curve to 10 years, again going a step further than the government, which had only managed a tenor of seven years before EDL-Gen’s issue.
The issue drew healthy demand, with its BBB+ rating from Tris Rating adding to its appeal and leading to a final book of Bt12bn. Buyers were well spread out among investor types, including insurance companies, asset managers, banks and high-net-worth investors.
The broad base and the rating helped EDL-Gen beat the Laos government’s previous issue in terms of pricing. The three-year yielded 4.95%, the seven-year 5.2% and the 10-year 5.45%, lower than the 5.2% at five years and 5.5% at seven that the Laos sovereign had paid five months earlier.
The issue raised EDL-Gen’s international profile, helping it attract strong foreign interest for a subsequent US$340m-equivalent equity offering. It also cleared the path for the Laos sovereign to obtain its own rating and print a Bt12bn issue seven months later.
Bank of Ayudhya, Standard Chartered Bank and TMB Bank were joint bookrunners for the deal, while Twin Pine Consulting was financial adviser to EDL-Gen.
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