Thai corporations issuing debentures could be given higher credit ratings if their debentures are guaranteed by the Credit Guarantee and Investment Facility (CGIF), says the Thai Bond Market Association (TBMA).
The CGIF was established by the 10 member states of Asean with China, Japan, South Korea (Asean+3) and the Asian Development Bank.
The organisation is a key component of the Asian Bond Markets Initiative of the Asean+3 cooperation, aimed at providing credit guarantees for bonds denominated in the local currency issued by investment-grade companies in Asean+3 countries.
By having the CGIF as a guarantor for debentures issued to raise funds in Asean+3 countries, these debentures will be awarded higher credit ratings, said TBMA president Tada Phutthitada.
The procedure will enable Thai corporations aiming to raise funds through debenture issuance to lower financial costs, Mr Tada said.
The CGIF's credit rating stood at AA with a stable outlook as rated by Standard & Poor's Global Ratings on June 22, 2018.
There are only two Thai companies that use the CGIF as their guarantor for debentures issued in the Thai bond market: Siamgas and Petrochemicals (SGP) and Boonthavorn Ceramic.
SGP has raised funds worth about 4 billion baht through two lots of debenture issuances, with the first batch given an A+ credit rating and the second batch an A rating. The first and second lots are 80% and 70% guaranteed by the CGIF.
Boonthavorn has mobilised funds worth about 3 million baht through debenture issuance, with a AA+ rating.
There have also been regional companies using the CGIF as their debenture guarantor, including Malaysia's KNM Group Berhad and Myanmar's Yoma Strategic Holdings, Mr Tada said.
"Thai companies benefit more from the CGIF because the organisation can help reduce interest cost and enhance credit ratings [for debenture issuance], which bolsters investment credibility," he said.
Thai commercial banks are expected to raise funds by issuing subordinated debentures of roughly 50 billion baht to be used as reserves under the Basel III capital requirement, Mr Tada said.