Thailand mandates Samurai

The Kingdom is preparing to return to the international public bond markets for the first time since 1997.

Salomon Smith Barney has been appointed as bookrunner for a Y35 billion ($284 million) deal, with Daiwa mandated as joint-lead. The deal is expected to have a five-year maturity and observers believe that it will be launched before year-end.

For many, the key question will be whether Thailand can price through or close to Korea despite the fact that the former has a lower BBB-/Baa3 rating compared to the latter's BBB+/Baa2. The most obvious benchmark is the recent five-year yen issue completed by the Korea Development Bank (KDB), which is currently trading at about 75bp over yen-libor.

Japanese experts say that Thailand should probably trade about 10bp to 15bp outside of KDB, but may be able to close the gap because it is a pure sovereign play and also has novelty value for yen investors. "It's been five years since Thailand last tapped the Samurai market, so investors have a lot of free lines," one banker comments. "Sheer scarcity value should push pricing tighter."

Thailand has not issued a public bond since April 1997, although Citibank did privately place a small Shibosai offering for the sovereign under the Miyazawa plan in 1999. It's major and highly illiquid benchmark remains its $600 million 2007 issue, which is currently trading at 146bp over Treasuries.

The sovereign has said that it is hoping to raise up to $1.5 billion from the international bond markets during 2002 and is contemplating issues in dollars, euros and yen. Its return to the international markets forms part of a heavy government borrowing programme, with experts anticipating a requirement for Bt660 billion ($14.8 billion). Of this amount, Bt220 billion will fund the budget deficit, Bt120 billion will be on-lent to state enterprises and Bt320 billion will cover the losses of the FIDF (Financial Institutions Development Fund).

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