Following roadshows in Asia and Europe this week, lead manager UBS is expected to price a rare high-yield bond offering from Thailand early next week. The issuer, G-Steel, is hoping to raise $150 million from a five-year debut bond that has a B1/B+ rating.
The deal is being mainly targetted at Asian account, given investors lack of familiarity with the credit, compounded by the company's unlisted status. However, the notes will not be sold to domestic investors as Thai nationals are not permitted to hold non-investment grade paper. Although it is not yet a listed company, G-Steel has announced that it will seek an IPO for which UBS is also mandated.
The rarity of offshore high-yield Thai debt makes comparables difficult to find. But specialists say the market is looking at Titan's $400 million similary rated B1/B+ deal due 2012. This is currently trading at 545bp over five-year Treasuries.
Further afield, integrated steel company AK Steel of the US has a 2009 bond currently trading at 496bp over Treasuries. AK Steel also has a B1/B+ rated credit, although typically Asian deals will come at a premium to their US comps, particularly in the high yield sector.
G-Steel is one of Thailand's leading producers of hot-rolled coil, which is used in the production of cold-rolled coil, hot-dipped galvanized sheet metal, steel pipes and sheet used primarily in the construction and automotive industries. G-Steel operates a mini-mill located 180km outside of Bangkok. It uses two electric furnaces arc and two ladel heat furnaces with a design capacity of 12.8MTPA and an effective capacity of 1.5MTPA.
The company recorded total revenue of Bt22 billion ($537 million) in 2004, with net earnings of Bt 9 billion ($219 million). As of June, total assets amounted to Bt 23 billion ($700 million) with total liabilities of BT2.4 billion ($59 million).
The company experienced some trouble as a result of the Asian financial crisis, which caused a decline in demand for steel, and limited its ability to find operating capital funding. In 2003, the company underwent a debt and capital restructuring programme that reduced G-Steel's debt ten-times from Bt63 billion ($1.5 billion) to Bt6.7 billion ($1.6 million). Total aggregate outstanding debt was further reduced through capital raising ventures to the current Bt1.2 billion ($30 million) level.
Use of proceeds will be used for the expansion of its steel production facilities.