Commonwealth Bank of Australia (CBA) said on May 29 that it has raised Bt4 billion ($116 million) from a debut sale of four- and seven-year bonds. The size, split equally between the two tranches, is the maximum allowed by the Thai Ministry of Finance, which gave permission to CBA and another Australian lender, ANZ, to issue baht-denominated bonds in February.
CBA's issue is the first by an Australian borrower in the Thai bond market, and the first by any overseas borrower since September 2008. A market source said that a wide range of domestic investors bought the bonds, including mutual and provident funds, insurance companies and government agencies. HSBC was the sole bookrunner and lead manager for the transaction.
The coupons for the four- and seven-year tranches are 3.93% and 4.80% respectively, implying yield spreads of 140bp and 158bp over comparable government yields, which was considered aggressive by market participants.
According to a banker familiar with the deal, CBA found a favourable window for swapping the proceeds into US dollars. The Australian bank was also keen to emphasise the diversification benefits of tapping a new investor base, and the help it was providing to the Thai Ministry of Finance in its objective of developing the local bond market by adding to the number of good quality investment instruments.
John te Wechel, general manager for group funding at CBA, said in a statement on Friday that: "We are delighted with this transaction for a number of reasons. It's great to be the first Australian issuer to access the Thai baht bond market. Very importantly, it has broadened our investor base and provided a competitive cost of funds without the support of the Australian Government guarantee."
Other potential issuers, of which there are eight, include the World Bank, its private sector lending arm the IFC, Swedish Export Credit, Kommunalbanken Norway and Agence Francaise de Developpement, which were all approved by the finance ministry last November, and have until the end of June to launch a deal.
The issuing rules for foreign borrowers were last revised in April 2006. Submissions take place four times a year, in February, May, August and November, and successful applicants must issue baht-denominated bonds within six months. Applications are prioritised according to credit rating, type of organisation, quota utilisation, relationship with Thailand, whether the potential issuer is from an Asean +3 country, and the use of proceeds. So far, only AAA and AA rated entities have been approved.
CBA, Australia's third biggest bank, is rated Aa1 by Moody's, and the equivalent AA by both Standard & Poor's and Fitch Ratings.
Already this year, CBA has issued bonds in US, Australian, Canadian and New Zealand dollars, as well as yen, Swiss francs, sterling, and Hong Kong and Singapore dollars. The bank has now completed its funding needs for its financial year ending in June.