PTT establishes 30-year curve

Energy group completes Thailand''s longest offshore bond.

PTT has completed Thailand's first 30-year bond deal with an increased $350 million offering via sole lead of JPMorgan. The A2/BBB+ rated transaction was priced yesterday (July 27) at the wider end of revised price guidance and marks a welcome diversification from the heavy wash of 10-year paper by PTT group entities over the past couple of months.

The Reg S 144a deal was priced at 97.281% on a coupon of 5.875% to yield at 6.073%. This equates to a spread of 160bp over comparable US Treasuries. Having kicked off roadshows with a deal size of $250 million and an initial guidance of around 155bp to165bp over US Treasuries, the lead was able to tighten the range as investor interest grew.

Guidance was revised Wednesday morning in Hong Kong to a deal size of $300 million to $350 million at 155bp to 160bp over. Fees came in at 50bp.

The order book is said to have closed about one-and-a-half times oversubscribed at the $525 million level. About 40-plus accounts participated, of which about a quarter came from Asia, with US-based investors making up the remaining majority. By investor type, the book was heavily weighted toward insurers, while fund managers and retail accounts accounted for the lion's share of the balance.

PTT's 2014 bond was trading at approximately 100bp over Treasuries at the time of pricing, some 60bp tighter than the new bond. Specialists cite a number of comparables with long-dated paper outstanding.

Hutchison Whampoa's January 2014 bond was trading at 75bp over Libor and its November 2033 at around 144bp over Libor - a 71bp differential.

In the same sector there is Chinese E&P company CNOOC whose May 2033 deal was bid at 155bp over Treasuries at the time of pricing. Bankers estimate the two-year curve to be worth approximately 5bp, which means PTT has priced flat.

The two companies share the same credit rating, although CNOOC is currently on negative outlook from both Moody's and Standard & Poor's thanks to its bid for Unocal.

PTT's deal establishes a number of benchmarks for the Asian debt capital markets. It incorporates the longest maturity for a dollar-denominated bond issued out of Thailand and represents the first syndicated 30-year deal to come out of Asia since Hutch's 2033 deal two years ago. Bankers note that while KT Corp did issue a similar tenured deal late last year that deal was sold down to a single investor.

PTT has opted for the longer term deal to term out its debt and take advantage of falling borrowing costs. Between 2012 and 2015, the group has about $3.7 billion total debt maturing.

PTT is Thailand's only fully integrated gas company. First quarter revenues increased 39.4% year-on-year to Bt191.2 million and EBITDA by 36.6% to BT24.3 million.

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