The Bank of Thailand (BoT) believes the risk of corporate bond rollover this year is limited despite higher interest rates, meaning it should not impact systemic risk.
The local bond market continues to function amid elevated interest rates, as private companies have been able to raise fresh funds from the market.
However, there are some rollover risks because of internal factors specific to each enterprise, Sakkapop Panyanukul, the central bank's senior director for financial markets, said in a media briefing on Monday.
Corporate bonds outstanding showed positive growth over the past three years, reflecting the ability of local corporates to raise fresh funding, he said.
Regarding higher financial costs related to the interest rate hikes, several private companies recently locked in cheap costs through bond offerings.
According to BoT data, corporate bonds outstanding in 2023 grew by 9% year-on-year.
Growth of bonds outstanding tallied 19% in 2022 and 11% in 2021 after a drop of 2% in 2020, attributed to the pandemic.
The proportion of undersubscribed bonds was marginal compared with total corporate bond issuance over the past two years.
The proportion of undersubscribed debentures remained steady, from 0.7% in the first half of 2022 to 1.1% in the second half.
The ratio declined to 0.9% in the first half of 2023, then rose to 1.9% in the second half.
The undersubscribed corporate bonds were largely high-yield bonds, offered by companies that had specific problems, said Mr Sakkapop.
The undersubscribed investment-grade bonds were offered by only 2-3 companies, again because of specific factors for the issuers, he said.
Mr Sakkapop said around 1 trillion baht worth of corporate bonds are due for redemption this year, of which 100 billion baht or 10% are high-yield bonds.
Rollover risks for the debentures are expected to be limited as a result of their marginal proportion compared with 90% of investment-grade bonds. Moreover, the high-yield bonds are largely held by high net worth individuals who normally have higher risk appetites than general retail investors, he said.
Local asset management companies investing in high-yield bonds represent only 0.1% of total bond investment, at around 600 million baht of the institutional investors.
As a result, the possibility of a rollover is quite low, noted the central bank. Banks' exposure to high-yield bonds is only 0.23% of the total loan portfolio.
"Given the limited risk of high-yield bond rollover, it should not impact overall corporate bond rollover for this year despite rising interest rates," said Mr Sakkapop.
The central bank has increased its policy rate eight times since August 2022, rising from 0.5% to 2.5%. The rate is at its highest level in a decade.
On Wednesday, Italian-Thai Development Plc (ITD) informed the Stock Exchange of Thailand its bondholders' meeting approved waiving of the debt-to-equity ratio, which was stipulated in the terms of rights, effective from the end of the 2023 accounting year until the end of the 2024 accounting year. This allows the issuer to enter into talks or contracts with creditors for debt restructuring without being considered as cause for default under the terms of rights.
Moreover, the bondholders approved an extension of the redemption for two years, increasing the bonds' interest rates in a range of 0.25% to 0.5% per year. ITD requested five series of debentures be extended.