Yoma executes Mynamar's debut offshore bond

The Singapore-listed company sets a new landmark for Myanmar as Thailand underpins its position as a regional financing centre for CLMV countries in the Greater Mekong Delta.
Singapore-listed Yoma Strategic Holdings set a new landmark for Asian bond markets on Friday after completing the first-ever offshore bond deal by a credit from Myanmar. 
 
The Bt2.22 billion ($70 million) five-year transaction also marks another important milestone for Thailand: cementing the country’s status as a regional financing centre for its CLMV (Cambodia, Laos, Myanmar, Vietnam) neighbours. 
 
However, unlike recent Thai-baht denominated bond deals from Laos, the transaction did not represent pure Myanmar credit. 
 
This would have been prohibitively expensive thanks to the enduring fallout from the 2016/17 Rohingya crisis. Since then, a number of Myanmar's FDI projects have been put on hold and frontier market investors have turned elsewhere.
 
Instead, the bond deal was guaranteed under the Asian Development Bank’s (ADB) Credit Guarantee & Investment Facility (CGIF). This enabled the deal to carry a triple-A rating from Thailand’s TRIS Rating. 
 
The ADB was particularly active in Thailand during 2018, experimenting with partial CGIF guarantees for the first time. In December, for example, it offered a 50% guarantee to home décor company Boonthavorn Ceramic (Kasikornbank guaranteed the other 50%) and a 70% guarantee to Siamgas and Petrochemical.
 
As a result, these two deals were the main pricing benchmarks for Yoma Strategic’s bond, which closed 2.5 times covered and was allocated to just under 10 investors. 
 
Pricing was fixed at 3.38%, or 124bp over Thai government bonds.
 
This was 6bp tighter than AA+ Boonthavorn’s similar five-year deal, which came at 130bp over government bonds. It was also 24bp tighter than A-rated Siamgas five-year offering, which was priced at 150bp over. 
 
By comparison, top Thai credits such as AA-rated Thai Beverages pay around 3.35% for five-year paper. 
 
At the other end of the scale, is the Lao Ministry of Finance, which has been using Thailand’s domestic bond markets for its government’s funding needs in the absence of one of its own. Its most recent five-year deal, issued in November 2018, carries a 5% coupon. 
 
Last year, also saw Lao state-owned electricity producer EDL-Generation return to the Thai bond market to raise Bt13.66 billion from a multi-tranche deal. The transaction was notable, not only because of its fairly low BBB+ rating, but also because the group was able to extend its maturity curve out to 15-years. 
 
Local bankers calculate that Lao entities have raised Bt50 billion in total since the sovereign first accessed the Thai bond market back in 2013. They also argue that they have averaged a cost of funding at roughly half what they would have had to pay in the wider US dollar-denominated bond market.
 
Twin Pine Group, founder and CEO, Adisorn Singhsacha, told FinanceAsia, “These deals are mutually beneficial for the CLMV countries and Thailand. They provide the former with a route to issue bonds in a market with ample liquidity and offer the latter diversification for domestic investors.
 
“And these credits are able to command a much lower risk premium than they would elsewhere because Thai investors are so familiar with them,” he added. “Thailand’s trade with the CLMV countries has been growing much faster than it has with Europe and the US in recent years.”
 
Singhsacha believes that even as the CLMV countries begin to develop bond markets of their own, they will still rely on Thailand for larger issues. 
 
So far no Vietnamese company has issued in Thai baht and the country’s domestic bond market is starting to grow strongly off a low base.
 
But the same cannot be said of Cambodia, Myanmar and Laos, which all lag far behind. 
 
However, both the Lao and Cambodian governments have announced their intention to begin issuing domestic government bonds in 2019 to set sovereign benchmarks. Bankers say that Cambodia is further ahead than Laos.
 
“The Cambodian Securities and Exchange Commission was very pro-active in laying the ground work for a domestic bond market during 2018,” said one.
 
This resulted in the first-ever domestic corporate bond offering last November: a 120 billion riel ($30 million) issue by microfinance lender Hattha Kaksekar. The International Finance Corp (IFC) took up 66% of the deal, which had a three-year tenor and 8.5% coupon. 
 
Other leading CMLV corporate credits have had to look elsewhere for funding.
 
Just as Yoma Strategic has provided the first benchmark from Myanmar: so too it was left to casino-operator NagaCorp to provide the first benchmark from Cambodia.
 
Similarly, NagaCorp was also not a pure Cambodian credit since it is listed in Hong Kong and owned by a Malaysian. 
 
Yoma Strategic’s Singapore listing has made it a easy entry and exit point for investors interested in Mynamar. Over the past few years, the direction has almost uniformly towards the exit, with the stock losing half of its value since early 2017. 
 
Proceeds from its bond issue are being used to support the group’s four pillar businesses: real estate, consumer, finance and automotive/heavy equipment.
 
The group derives about 60% of its revenues from real estate. Its prime project is the re-development of the historic and former headquarters of Myanmar Railways into a mixed-use complex, which will include a Peninsula hotel.
 
On the consumer side, Yoma owns the Myanmar franchise for KFC and is planning to expand to 32 outlets by March this year.  It has also recently expanded into financial services, purchasing a 34% stake in Wave Money to tap mobile financial services growth in the country. 
 
Bangkok Bank was lead arranger for Yoma Strategic’s bond deal, with Bangkok-based Twin Pine Group acting as advisor.  
 
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