Investment-grade firms avoid BSF

None of the companies with investment-grade credit ratings sought financial assistance from the central bank's Corporate Bond Stabilisation Fund (BSF), reflecting they are still able to access funding sources, says the head of the Public Debt Management Office.

Lack of participation in the BSF bodes well, as it indicates that funding sources are still accessible, said Patricia Mongkhonvanit, who is also a member of the BSF committee.

One company applied for BSF funding in early April, but eventually sought another source of funding, she said.

The BSF is a 400-billion-baht bridge financing facility to help investment-grade corporate bond issuers that are unable to fully roll over bonds maturing during 2020-21.

The fund is limited to investment of up to 3% of the entire facility in each corporate bond issuer, and up to 10% for each sector to diversify risks. The BSF is under the government's third phase of relief measures, aimed at maintaining financial system stability, building up investor confidence and avoiding debt meltdown.

The BSF is prohibited from investing in more than 10% of each company's financial liabilities.

During May-June, 200 billion baht worth of debentures were due for redemption, of which 68% have a credit rating of A- or higher, 22% have a rating in a band of BBB+ to BBB-, with lower credit ratings making up the remainder, according to the central bank data.

To make the BSF the last resort for corporate bond issuers, the fund charges higher rate than banks and its conditions are quite tough.

The BSF charges the facility premium at 1% per year for up to 30% of the rollover amount.

To be eligible for the BSF, corporate bond issuers have to raise at least 50% of necessary funding by themselves, of which no less than 20% each comes from issuing bonds to public and non-bank companies, and seek financial institution loans or sell bonds to them. If they are unable to get at least 50% from either party, they must ask shareholders to provide the remaining funding.

Proceeds arising from the BSF scheme are prohibited to be used to repay debt early, lent to directors and shareholders, pay bonuses to directors or the top two executives, as well as for dividend payments, except for payments announced before April 29.