Noble preps for corporate bond rollover

Noble preps for corporate bond rollover

The first instance of corporate bond rollover amid the coronavirus outbreak is coming next month, but subscription for the rollover is only at 30% of the total amount as investor sentiment continues to be riled by uncertainties.

SET-listed Noble Development Plc recently offered the company's investment-grade debentures worth 1.5 billion baht, with distribution dates of April 20-22. The debentures' maturity period is three years, with a fixed return of 4.5% annually and interest paid every three months.

The debentures received a BBB rating and a negative outlook by Tris Rating on Nov 11, 2019. Since they are unsecured corporate bonds, a bond representative is appointed to look after investors under Securities and Exchange Commission rules. CIMB Thai Bank is the bond underwriter and distributor.

Korakot Kamolnetrapisutt, first vice-president for credit and FX product distribution at CIMB Thai, said the Noble corporate bonds were mainly offered to high-net-worth clients and some institutional investors, with combined subscription value of 582 million baht out of the total 1.5 billion baht.

"The subscription amount is not surprising because we expected the market to remain volatile, and Noble is the first corporate bond to test the market after the Covid-19 outbreak," Mr Korakot said. "Even though the company offers a very attractive return, higher than the investment-grade range by 0.5-1%, market response is still weighed by prevailing concerns and investors would prefer to invest in higher investment-grade debentures or bank deposits."

There is no problem with the the issuer, he said, as the company has already prepared liquidity for the debenture rollover, set to mature on May 5, via internal cash flow and bank loans.

The next rollover of Noble debentures will be in November this year in the amount of 1.05 billion baht. By then, market sentiment is expected to have improved, Mr Korakot said.

"One of the significant factors for a lesser subscription is the lockdown measures," he said. "Bank employees cannot talk with investors face-to-face, and the allotment was done through CIMB Thai's digital banking app. As a result, investment information was not enough for decision-making, apart from the conservative investment approach during a time of market uncertainty."

May will also see two corporate bond issuances, both featuring investment-grade debentures. The first is by a subsidiary of True Corporation Plc, with a BBB+ rating for two-series debentures worth a combined 9 billion baht.

Charoen Pokphand Foods Plc is the other issuer. The offered size remains undisclosed, but the rating is A+ with a negative outlook.

Asia Plus Securities chief executive Kongkiat Opaswongkarn said ASP is one of the active underwriters for corporate bonds, especially non-rated and high-yield bonds, as they are an alternative investment choice for investors.

The economic downturn and the pandemic have hit business operations, leading investors to shun corporate bonds. Debenture issuers face rollover difficulty, especially those that have issued non-investment-grade debt.

"We try to help bond issuers and give them advice on how to survive during the crisis," Mr Kongkiat said. "Most companies can solve the problem, but some companies may default on bond interest payments, though the damage will be limited because the value is very small and the impact will be within a specific group.

"We have recommended bond insurance to increase asset quality, offer higher rates of return, sell assets to generate more cash flow or increase collateral assets or asset-backed securities for bonds so companies can receive more liquidity."

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