How much debt do you now have outstanding?
Currently the group's total debt is around Bt120 billion ($3 billion), all of which is in local currency. A very small amount of this includes swaps into Thai baht from US dollars. Close to Bt90 billion is in local currency debentures, which is still below the Bt110 billion limit set by our board of directors. As you can see, our main borrowing is debentures and much less, about Bt30 billion, is bank lending. So our debt portfolio is totally changed from the peak of the crisis. In 1997 we had debts of Bt247 billion and the majority, around 80%, was in foreign currency: US dollar, yen and by that time even deutschmarks. From around 1999 onwards we started issuing debentures. At the peak we had about Bt100 billion but we have paid down some since then.
What are your debt reduction plans?
We have used internal cash flow to pay down some debt. Our current target is to reduce debt to a level that we find comfortable. Our net debt-to-Ebitda ratio was about 3.4 by the end of the last quarter. We expect to reduce this to around 3 times, which should be OK but it's difficult to make comparisons in the industry because we are conglomerate; petrochemicals is now our biggest business, with cement and paper at about the same size, around 25%, and then construction materials, which is a growing part of the business.
Can you tell us about the most recent deals you have done?
We issued a four-year debenture in November at a coupon rate of 3.25% and one in April at 3.5%.
What are your borrowing plans for 2004?
Next year we're going to have Bt25 billion worth of debentures maturing. The first lot in April, from a debenture we issued about five years ago. The average coupon rate of the debentures coming due is around 8%, so we expect to make some savings. We're going to refinance with new issues, but not more than Bt25 billion. Last year the average cost of our debt was about 7.2% and we paid about Bt10 billion in interest charges, but after the two debentures we issued we have lowered our interest costs drastically. Our debt level is also coming down – each year we have free cash flow of about Bt20 billion plus some dividends from associated companies – so this year we expect to pay about Bt8 billion in interest, based on a charge of about 6.5%.
What is your credit rating and what is the likelihood of that changing?
We have got a rating of A-. It's getting better and with our debt levels coming down we expect we can get an A. Our financial position has improved drastically. After the crisis our net debt-to-Ebitda ration was 9-10. But our target for the end of next year is three; a target we set three years ago. I think it will be quite comfortable for us to do that, though we don't know if the credit rating companies will give us an A rating at three or 2.5. It may be 2.5.
What do you perceive to be your main credit strengths and weaknesses?
Our debentures are unique. We have more than 6,000 retail customers. We try to have a long-term relationship with these customers and, as a result, they are very loyal to us. When we issue bonds it is never enough; they ask us to issue more and more. Part of this is our good track record. After the crisis we didn't take a haircut, we didn't ask for one, we paid down the full amount of all the interest. From 1997 to today we have paid more than Bt80 billion in interest, so we have honoured our commitments. Weakness? We still think the current portion of debt is a bit high.
What cost of funding do you typically aim for?
It depends on the market. For borrowing long-term dollars, three or four years, we can get less than 50bp, which is quite a good deal. For short-term Thai baht borrowing it can be as little as 25bp over government debt, but for longer term it's around 120bp.
Are there any circumstances in which you would consider a return to the international market?
I don't think so because domestic liquidity is so huge now.
The stock exchange has just launched a retail bond exchange. How important is the development of a retail bond market for corporate borrowers in Thailand
We had a meeting with the stock exchange four or five months ago and urged them to trade bonds because even by that time we were the biggest private sector issuer of bonds in Thailand. It's very important to develop a retail bond market in Thailand and I now it will develop fast because Thai people, especially seniors, don't want to take the risk in the stock market.