The DAD Show

Thailand launches largest ever securitization for new Government office centre.

Bangkok Bank, HSBC and Thai Military Bank have closed Thailand's first ever future flow securitization with a multi-tranche Bt10.3 billion ($250 million) deal for the Thai Government. The deal represents the securitization of rental revenue of a future government office centre yet to be constructed in Bangkok.

The AAA (Fitch & Tris) rated deal marks a number of firsts for the Thai securitization market. It is Thailand's first publicly offered securitization; the first bond offered to both retail and institutional investors and is the largest and longest dated domestic securitization. It is also the first securitizations from a series of intended "mega-projects" planned by the Thai government.

Backed by the 30-year lease and fee payments from the new government headquarters at Cheng Wattan in Bangkok, the deal is issued via DAD SPV, a special purpose vehicle established by Dhanarak Asset Development. Dhanarak is an asset development company wholly owned by the Thai Ministry of Finance, tasked with developing the project, estimated to cost Bt40 billion.

The new bonds are offered from a securitization programme for Dhanarak permitting for up to Bt24 billion of issuance. However, according to Fitch's ratings report, "the issuance of the remaining bonds is dependent on the issuance not affecting the ratings of the outstanding bonds."

The deal consists of four bullet tranches, two retail and two institutional. A first tranche a Bt1.5 billion seven-year tranche was sold to retail investors with a coupon of 6.7%. The second retail tranche comprises a Bt2 billion 10-year issue priced at 7.35%.

The first institutional tranche comprises a Bt1.8 billion 15-year offering, marketed at 7.40% to 7.80% and priced at the tight end at 7.50%. Tthe fourth tranche for Bt5 billion of 20-year notes was marketed to institutional investors at 7.75% - 8.05% and priced at the wider end on a coupon of 7.99%. All tranches carry an issue price of par. Reflecting strong demand for the deal, the retail tranches were fully subscribed in their first day on offer, while the institutional tranches were upsized from Bt1.5 billion to Bt1.8 billion and Bt4.5 billion to Bt5 billion respectively. In terms of institutional investor type, insurance companies took the lion's share, accounting for 64.1%.

Government related agencies were the next big buyer taking up 29.4%, while mutual funds bought 6.2%, with others accounting for the remaining 0.3%. Proceeds from the bonds will be used by DAD to fund the construction of the project, with rental payments slated to commence in July 2008.

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