B/E issuers risk rollover amid rising interest rates

B/E issuers risk rollover amid rising interest rates

Thai Bond Market Association (TBMA) warns bill of exchange (B/E) issuers are at risk of failing planned rollover of the debt instruments as an imminent upward trend of interest rates and the recent defaults of three SET-listed companies will whittle down investors' appetite.

Tada: Major defaults are anomalies

B/E issuers should prepare to be liquid in case fund-raising plans to roll over the debt instrument are not successful in the future, TBMA's president Tada Phutthitada said.

"The low-interest rate environment for an extended period has encouraged investors to hunt for yields, opening opportunities for issuers to mobilise funds through B/E and other short-term debt instruments. However, the situation is changing, and demand may be dampened by the rising interest rate trend," he said.

At the end of 2016, outstanding short-term debt instruments amounted to 412 billion baht.

Excluding B/Es issued by banks and financial institutions, outstanding B/E issued by the business sector totals 262 billion baht, of which 221 billion (rated B/E was at 151 billion and non-rated B/E made up for the rest), will be due in September of this year.

Even though three SET-listed firms that defaulted B/E payments in the fourth quarter of last year are anomalies, it is undeniable that the defaults whittled down investors' demand for high-risk, high-return assets, Mr Tada said.

The three companies were Nation Multimedia Group Plc (NMG), KC Property Plc and Inter Far East Energy Corporation Plc (IFEC).

NMG failed to pay 100 million baht worth of its unrated B/Es issued to Asset Plus Fund Management in October as the Securities and Exchange Commission's ban of its board of directors disrupted the company's financial transactions.

KC default two lots of unrated B/Es worth 170 million baht in December and the company's 180 million baht worth of B/Es is due this year.

IFEC yesterday defaulted its payment for B/Es worth 200 million baht and its B/Es worth 1.92 billion and other short-term debt instruments worth 3 billion are due this year.

Mr Tada said the three companies account for less than 0.01% of total outstanding B/Es.

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