Kexim back in baht

Kexim returns with its first baht-denominated bond deal in more than two years and its lowest ever coupon in the currency.

The Export-Import Bank of Korea (Kexim) underlined its reputation as Asia’s most diversified and savviest borrower on Monday following the completion of a Bt10 billion ($279 million) three-year bond deal.

The issue represented Kexim’s first baht-denominated deal in just over two years and the largest single tranche issue by foreign borrower in the currency to date.

Pricing came at the tight end of guidance after the deal built up an order book of Bt17 billion.

Thailand’s local insurance firms, institutional investors, money managers and banks were major buyers of Kexim’s latest offering, according to one source close to the deal. “Lack of supply from Asian issuers was one major reason why this deal was so strongly supported,” the source said.

This pent-up demand enabled joint lead managers HSBC and Krung Thai Bank to price the transaction at 45bp over government bonds after initially marketing it at 45bp to 50bp over.

The coupon was fixed at 2.18%, the lowest level the A+/AA-/Aa3 rated group has ever achieved in baht. Its last foray, in March 2013, saw it raise Bt8 billion from a combination of three- five- and 10-year maturities that carried respective coupons of 3.43%, 3.81% and 4.34%.

As with previous deals, the issuer took an opportunistic view of the cross-currency swap market to swap the proceeds back in to dollars. For the past few years, Kexim has been attempting to diversify its funding base and print about 40%-60% of its annual funding requirements in non dollar-denominated currencies.

According to Dealogic figures, Kexim has raised more money during the first eight months of this year than it did during the same period in 2014, seeking to lock in funding ahead of potential (but now fast receding) hikes in US interest rates.

Through to the end of August, Kexim raised $6.9 billion from 52 deals. Of this total, dollar-denominated bonds amount to $4.8 billion via 29 transactions. 

By comparison, in the eight months to end August 2014, Kexim raised $5.9 billion from 29 deals. At that point it had borrowed $3.6 billion in dollar-denominated bonds via 13 deals.

Prior to its latest baht-denominated issue, Kexim was most recently in the offshore bond markets one week ago. This saw it raise $50 million from a 10-year deal on a coupon of 3.047% via Citigroup.

Dealogic figures also show that global borrowers have raised the equivalent of $10.3 billion in baht-denominated bonds from 134 transactions so far this year. This compares with $13.7 billion raised via 133 deals over the same period last year.

Foreign issuers that retained proceeds in baht currently benefit from currency depreciation. The Thai currency slumped 0.04% to 35.860 per US dollar on Monday, its lowest level in six years. The baht has slid 12.13% against the US dollar over the past year, making it one of Asia’s worst performing currencies.

HSBC economist Nalin Chutchotitham expects it to weaken further to 26.2 by the end of the year, citing China's slowing economic growth and drought conditions domestically.

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