Thai Aromatics: sweet smell of success?

Third PTT company taps the dollar bond market.

After a two-week delay, Thai Aromatics was able to complete a $300 million seven-year bond deal yesterday (July 14) via ABN AMRO and UBS.

The Baa3/BBB rated issue was priced at 99.847% on a coupon of 5.5% to yield 5.527% or 150bp over Treasuries. Fees were undisclosed, which undoubtedly means they are very low and probably on a par with Thai Oil's recent $350 million issue, which paid about 13bp.

Thai Aromatics' deal was re-launched and closed within a 24-hour period, resulting in a $600 million order book. About 56 accounts participated, of which 34% came from Singapore, 35% from Europe, 16% from Hong Kong, 9% rest of Asia and 6% offshore US. By investor type, banks took 60% and asset managers 40%.

Observers say the order book had a similar profile to recent PTT group deals. "The two week delay allowed a number of accounts to increase their credit lines," comments one observer. "One of the biggest orders came from an account that hadn't been able to top up its exposure to the group a few weeks ago,"

A lack of free credit lines has been cited as one of the main reasons the group was unable to hit its pricing targets first time round. Since the beginning of June there have been three bond deals for PTT group companies - a $350 million issue for Thai Oil and a $300 million issue for Thai Olefins.

Thai Oil's deal was initially considered a great success, but began widening when Thai Olefins hit the market and traded badly. When Thai Aromatics then attempted to access the bond markets as well, the two widened even further.

At the time of Thai Aromatic's first attempt Thai Oil was bid at 127bp over Treasuries, some 7bp wider than its launch spread. Thai Olefins meanwhile traded out to 168bp bid compared to 149bp at launch.

When Thai Aromatic's re-launched, Thai Oil had settled back down to 120bp again and Thai Olefins had tightened to 157bp. By the time Thai Aromatics priced, Thai Oil is said to have remained static at 120bp, while Olefins had tightened slightly further still to 153bp.

On a Libor basis, Thai Olefins' 10-year deal is said to have been trading at 110bp over, while Thai Aromatics deal was priced at 104bp over. Bankers calculate the curve is worth about 15bp, which means Thai Aromatics has come at premium of roughly 9bp to 10bp.

Had the deals been more spaced, Thai Aromatics may have been able to come tighter than Olefins since it has a higher credit rating. The latter has a Baa3/BBB- rating, which is one notch lower on Standard & Poor's side. Thai Oil is rated two notches higher than Olefins at Baa1/BBB.

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