Siam Commercial Bank led a number of notable offerings that added depth and breadth to Thailand’s maturing bond market. It showed its creativity in designing innovative solutions, and used its network to distribute the biggest deals.
Among SCB’s landmark deals was a creative take on a zero-coupon bond for oil group PTT, which had directed banks to pitch them a bond with an innovative structure. SCB rose to the challenge to devise a Bt10bn (US$311m) 10-year bond, paying all accrued interest and principal at redemption – something not tried previously in the local market.
The structure was based on a zero coupon bond, which is typically issued at a discount and pays no coupon. To balance the issuer’s requirements and the need to attract investors, SCB put forward a coupon-bearing bond issued at par with all principal and interest to be paid only at maturity.
PTT liked that it did not have to make any payments until maturity, and that it did not require the stringent covenants of a similarly structured loan.
The question was – would investors bite? SCB had done its homework, targeting insurers hungry for long-dated paper from high-quality credits and able to enjoy delayed tax payments. The bond also allowed investors to boost their internal rates of return indirectly.
At a yield of 5.12% for 10-year paper, the Triple A rated issue offered a generous premium of 76bp over government bonds and closed 2x oversubscribed. The September deal was the first of its kind in Thailand and showcased the willingness of corporations and banks in the Kingdom to experiment with new structures. Krung Thai Bank co-led the offering, but the structure came from SCB.
One of SCB’s key strengths is its more than 1,100 retail branches, more than any other bank. Retail investors account for half of the investor base in the local bond market, and the bank’s vast network was key to helping SCB complete Thailand’s largest corporate bond in October. CP All, fresh from its US$6.6bn acquisition of wholesaler Siam Makro, raised Bt50bn from the multi-tranche offering, above its original Bt40bn target.
“More important than just the number of branches or the bank’s size is the fact that we consistently offer solutions to clients,” said Sirote Vichayabhai, executive vice president and head of capital markets.
SCB’s role in the secondary corporate bond market also improved during the review period as the bank stepped up its support of deals for its clients. Data from the Thai Bond Market Association showed that SCB was the second most active dealer in the secondary market in 2013, up from third in 2012.
To see the digital version of this report, please click here.