As Thailand’s bond market reached new heights, one top underwriter played an instrumental role in the most innovative deals. For finding the right solutions for clients and helping to take the local market to another level, Siam Commercial Bank is IFR Asia’s Thailand Bond House of the Year.
In an easy interest-rate environment in Thailand, where liquidity was abundant and volumes high, Siam Commercial Bank ended the review period with a huge share of the baht bond market.
More than that, it made full use of its customer-focused strategy to provide solutions that matched its clients’ funding requirements, and showed it was not afraid to introduce innovative products.
“We don’t wait for the flow from investors,” said Pimolpa Suntichok, executive vice president and head of capital markets at Siam Commercial Bank.
“Our approach is client-centric. We’re not just helping them with bonds or project funding, clients may also need our advice as a partner, and we look to cater to the ongoing needs of the company.”
At the outset, the Bt6.5bn (US$211.6), seven-year bond from Bangkok-listed blue-chip Siam Cement was made to look like a plain vanilla paper with a coupon of 4.35%. Yet, it came with a twist that demonstrated the bank’s ability to come up with the right product for the situation.
Unusually, Siam Cement swapped the proceeds into US dollars to meet its funding requirements.
Siam Commercial, as sole lead on the deal, advised the issuer that it could get cheaper funding by leveraging off its leading credentials in its home market to get better pricing than it could achieve through offshore bonds or a syndicated loan. Siam Cement is the second-biggest issuer in Thailand’s local currency bond market, behind only state energy giant PTT.
The sole lead also decided to approach only institutional investors for this trade to ensure quick execution and lock in the attractive swap rates that were available at that time. This route proved to be much quicker than tapping retail investors, in which case it would take longer to bookbuilding and distribute.
For the issuer, this was a departure from its typical retail-targeted offerings, a regular feature over the last 10-years, but it achieved a lower cost after the currency swap to raise dollars through this transaction.
The deal also showcased Siam Commercial’s penetration among the institutional investor base, as the bank was able to complete the deal within just three weeks of pitching it to the client.
Siam Commercial also showed its commitment to deepening a market with its involvement in the country’s first perpetual bond from a corporate issuer.
PTT Exploration and Production’s Bt5bn perpetual was Thailand’s first corporate hybrid, and allowed the issuer to meet its objectives. The notes came with full equity treatment for accounting purposes and 50% equity credit from rating agencies, thus avoiding a dilution of PTTEP’s shareholders or putting pressure on its rating.
Launching a completely new structure was not easy and a required a lot of investor education, as well as convincing the regulator of this new format.
Siam Commercial’s network of 1,100 branches – it has been Thailand’s biggest bank in terms of branch coverage since 2005 – helped it to educate retail investors about this new asset class.
In addition to investors, Siam Commercial and the two other leads on the deal also had to work closely with the Thai Securities and Exchange Commission to win the regulator’s approval for the deal.
Siam Commercial has been extending this
approach to other products, and is teaching investors about the new bank capital instruments that are likely to come to market next year as Thailand adopts Basel III rules.
“We have been educating our retail market of this and they have to be ready for a more complicated instrument. We are working to get the market deeper,” said Suntichok.
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