Thai Olefins priced its debut dollar-denominated bond in London on Friday night (June 17) via lead managers Citigroup and Deutsche Bank. The $300 million 10-year issue priced inside of revised guidance.
The BBB-/Baa3 rated transaction was priced at 99.469% on a coupon of 5.5% to yield at 5.57%. This equated to a spread of 149bp over 10-year US Treasuries.
Having kicked off roadshows in Hong Kong and Singapore earlier in the week with an initial guidance of around 155bp over US Treasuries, the leads were able to tighten the range as investor interest grew. Demand is said to have topped $500 million within the first two days of roadshows.
Books went on to close two-and-a-half times covered with participation by 66 accounts. By geography, the book split was 67% Asia and 37% Europe. By investor type, banks accounted for 39%, while 37% went to fund managers, 11% insurers and the remaining 13% to retail and others.
The clearest pricing benchmark is a $350 million bond issue by sister company Thai Oil, which came to market at the beginning of June. The group priced a 10-year deal at 120bp over Treasuries and was still trading at this level on Friday.
This means Thai Olefins has paid roughly 29bp over Thai Oil, which has a higher rating of Baa1/BBB. Like Thai Oil, the new deal from Thai Olefins was viewed as a higher yielding alternative to parent company PTT. The latter owns 49% of Thai Olefins and guarantees a majority of its revenues.
Funds are primarily being used to repay existing debt - it has a Bt2.8 billion ($685 million) maturing this year - and to finance its expansion plans. Thai Olefins is looking to spend some $120 million to upgrade its petrochemical production.
Thai Olefins owns and operates Thailand's second-largest petrochemical plant, with a total capacity of 940,000 tons per year, accounting for 27% of the country's olefin production capacity.
PTT is planning to merge Thai Olefins with another of its subsidiaries, National Petrochemical Company (NPC), which is 38% owned by PTT. Following the merger Thai Olefins would become Thailand's largest petrochemical products producer and form the flagship of PTT's petrochemical business.
In its ratings release, Standard & Poor's stated that Thai Olefins could be upgraded to BBB, dependant on the certainty of its forthcoming merger with NPC.