Siam Pulp and Paper (SPP) of Thailand, the largest producer of industrial paper in the Asia-Pacific region, has issued Bt10 billion ($224.2 million) of bonds in a deal guaranteed by its parent company, Siam Cement (SCC).
Bangkok Bank, Deutsche Bank, Siam Commercial Bank, Thai Farmers Bank and Thai Military Bank acted as joint lead-managers on the transaction.
SPP's offering, rated single-A by Fitch Ratings, was split into two Bt5 billion tranches, one for three years and the other for five years. The shorter-dated piece carries a fixed coupon of 5.5% and the coupon on the five-year bonds was set at 6.5%.
Both notes priced at 99.99, giving a real yield of 5.537% for three years and 6.552% for five years. Although there is no equivalent three-year government benchmark, SPP's three-year notes give a spread of 228bp over two-year treasuries and 138bp over five-year government bonds.
A spread pick-up of 240bp can be gained on SPP's five-year paper.
The last few months may have been extremely quiet for Thailand's domestic bond market, but Vorapak Tanyawong, co-head of global markets and head of Deutsche's debt capital markets and liability risk management team in Thailand, says the success of the SPP transaction points to a resurgence in activity in the next few months.
"The reputation of SCC as a guarantor and the A rating from Fitch attracted overwhelming interest from retail investors," comments Tanyawong. "As a result, the issue was heavily oversubscribed within the first day of launch. Following the rise in the baht yield curve since July, the success of this transaction has re-activated the corporate baht bond market and demonstrates the execution capabilities of the arranger banks."
Thirteen companies are incorporated under the SPP banner and the group recently recorded a net profit of Bt894 million in the second quarter of 2001, up 14% from the Bt783 million achieved in the same period last year.
Proceeds from the issuer's first bond deal will be used to refinance existing bilateral loans, inter-company loans and to boost expansion of the firm's pulp capacity.