Corporate bond issues to hit B800bn

Corporate bond issues to hit B800bn

TBMA survey finds muted default risk

Corporate bond issuance is expected to top out at 800 billion baht this year, with the value of debenture rollover estimated at 300 billion baht in the second half, says the Thai Bond Market Association (TBMA).

The outstanding amount of corporate bonds in the second quarter was 388 billion baht, with 323 billion baht attributed to long-term debenture issuance.

For the first half, there were ten companies that announced extension of the interest payment period, with the total amount worth 7.25 billion baht.

The TBMA and other organisations conducted a survey among high-yield bond issuers and found muted default risk, given that banks have expressed support for these issuers in terms of providing financial liquidity.

Previously, the Securities and Exchange Commission and capital market representatives agreed to set up a high-yield bond fund to provide liquidity for non-investment-grade debenture issuers battered by the coronavirus crisis.

The fund is to be set up in the form of a mutual fund or a trust fund and classified as a closed-end fund managed by financial experts.

Investment is restricted to institutional investors and high-net-worth investors, with mechanisms in place to protect investors' benefits and risk acceptance level.

Thailand's bond market had an outstanding value of 13.69 trillion baht in the first half, up 1.3% from year-end 2019, mainly due to increased government bond issuance.

On the other hand, the private sector has delayed bond issues, causing the total amount of corporate bond issuance during the first half to arrive at 3.23 billion baht, down 43% from year-end 2019.

Despite being blighted by a sell-off during the first three months, debenture market conditions have improved since April, with investment-grade bonds and high-yield bonds raising funds to the tune of 41% and 34% of total bond issuance, respectively, from April to June, said TBMA president Tada Phuttitada.

In March, two fixed-income funds of TMBAM Eastspring were a catalyst igniting a major redemption in Thailand's mutual fund industry, to the point where the selling spree nearly sparked a liquidity crunch.

Net sales of Thai bonds by asset management companies totalled 35 billion baht on March 20 and 30.5 billion baht on March 27, according to data from the Thai Bond Market Association.

Local financial authorities on March 22 issued urgent measures to address a liquidity problem in the mutual fund industry.

Concerns have continued to flare amid anaemic economic conditions and a low-interest-rate environment, as the credit spread between government bonds and corporate bonds has continued to widen, especially for lower- and non-rated bonds, Mr Tada said.

The economic slowdown could potentially harm company profits and damage credit ratings in the future, he said.

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