Thailand Capital Markets Deal
Thai Beverage’s Bt77bn (US$2.3bn) seven-tranche offering made history as Thailand’s largest corporate bond, proving that South-East Asia’s biggest local bond market can support even the most audacious of acquisitions.
ThaiBev, rated AA by Tris, had already raised Bt50bn in March – equalling the biggest issue on record in the baht market. At the time, the company behind Thailand’s popular Chang beer had real scarcity value, selling its first bonds in almost 12 years to fund four acquisitions in Thailand and Myanmar, following a shopping spree to strengthen its leadership in Indochina’s alcohol and soft drinks markets.
Buoyed by the robust response, ThaiBev returned in September with plans to raise at least Bt70bn to refinance bridge loans taken to fund its US$4.8bn purchase of a 53.59% stake in Saigon Beer Alcohol Beverage Joint Stock Corporation in Vietnam.
Thai Beverage had high expectations of a similar reception, but the joint lead managers, reprising their roles from the March deal, immediately faced major challenges – not least worsening market conditions.
Thai government bond yields had surged. TGB yields for three and five years had increased 43bp–46bp in the six months since ThaiBev’s earlier issue, while the 10-year yield had risen around 20bp. Average credit spreads on corporate bonds rated AA had widened from 6bp to 12bp across the curve. Institutional investors also faced exposure limits, having taken big positions in the March deal.
ThaiBev had to expand its target investor base to maximise demand, tailoring a 3.5-year tranche for high-net-worth individuals, while a 10-year non-call five tranche was promoted to credit cooperatives, which liked the call option.
The issuer embarked on several one-on-one meetings with investors to sell the deal and explain its vision for growth.
To keep things manageable for the lead banks, the bookbuild took place in two parallel stages: ThaiBev placed a total of Bt56.14bn at tenors of two years four months, 3.5 years, five years, seven years and 10-year non-call five to institutional investors and HNWI; and sold another Bt11.6bn private placement in two and 10 years to only institutional investors.
The strategy of targeting HNWIs paid off, as individual investors were allocated over Bt25bn of bonds, up from just Bt1bn in March.
Final pricings of the bonds were 2.6% for the two-year tranche, 2.64% for the two-year four-month note, 3.2% for the 3.5-year note, 3.35% for the five-year piece, 3.62% for the seven-year tranche, 4.16% for the 10-year tranche and 4.16% for the 10-year non-call five. The blended financing cost was 3.42% with an average life of 5.24 years, in line with the issuer’s expectations.
Bangkok Bank, Bank of Ayudhya, Kasikornbank, Krungthai Bank, Phatra Securities, Siam Commercial Bank and Standard Chartered Bank were joint lead managers and underwriters.