Deal said to be largest-ever for domestic corporate bond market
Washington D.C., October 17, 2002
—The International Finance Corporation (IFC), the private sector arm of the World Bank Group, has issued its first structured partial credit guarantee on a local bond issue in Thailand. The partial guarantee relates to 18.5 billion baht (US$425 million) of bonds offered by TelecomAsia (TA), the largest private fixed-line telephone operator in Thailand. The partial guarantee offered by IFC is part of a broader strategy to be more responsive to client needs by extending credit in local currency and developing local capital markets.
IFC’s participation in the transaction, arranged by Merrill Lynch Phatra, helped ensure the successful completion of this large, local bond issue with one of the longest maturities to date in Thailand of any corporate debenture. TA issued 11.7 billion baht ($270 million) of six-year bonds, and 6.75 billion baht ($155 million) of eight-year bonds. The IFC partial credit guarantee covers 3.375 billion baht ($77 million), or nearly half of TA’s eight-year bond issue as well as a subordinated loan of 1.125 billion baht ($26 million). The bonds guaranteed by IFC received a single-A rating by Thai Rating and Information Services, a three notch upgrade from TA’s stand-alone rating of triple-B.
The use of a partial guarantee by IFC is a significant step in its drive to contribute to bond market development and broader capital markets in Thailand. “The partial guarantee will set benchmarks for larger corporate bond issues with longer maturities,” said Nina Shapiro, IFC Treasurer. “Increasing issue size and maturity is one of the best ways to increase market liquidity, which is often constrained by inadequate supply of quality paper relative to demand.”
TelecomAsia is a leading provider of telecommunications services in Thailand offering fixed line telephone and other related information and communication services. With its modern fixed line network in the Bangkok Metropolitan Area, TA is positioned as a high quality provider of telecommunications services to residential customers as well as all segments of the business market. The proceeds from the issue will be used by TA to convert most of its $500 million foreign debt into baht to minimize foreign exchange risk and strengthen the firm’s financial position. The new IFC-backed bonds will have maturities of eight years, compared with the previous five-year standard. The completion of this transaction translates into access to previously unavailable long-term, local-currency financing for TA.
“IFC has welcomed the opportunity to help TelecomAsia achieve a more appropriate capital structure. This will allow the company to focus on the important business of continuing to improve the quality of information and communication services provided to Thai consumers and businesses,” noted Mohsen Khalil, Director of IFC’s Global Information and Communication Technologies Department.
IFC’s mission (
www.ifc.org
) is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. Since its founding in 1956 through FY02, IFC has committed more than $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY02 was $15.1 billion for its own account and $6.5 billion held for participants in loan syndications.
