The Asian Development Bank (ADB) has issued its debut Thai baht bonds in the domestic capital market of Thailand, with a principal amount of Bt4bn and a bullet maturity of five years. The lead arrangers were Citigroup and Siam Commercial Bank.
The issue represents ADB’s third market-opening transaction in the region in just over a year, following bond issues in India and Malaysia in February and November 2004, respectively.
Priced at par, ADB’s baht bonds carry a semiannual coupon of 3.87% per year and were priced at a spread of 17bp over the five-year Thai government security. Before launching the issue, ADB and the lead arrangers conducted an extensive road show in Bangkok to present the deal to key institutional investors.
Offered through a bookbuilding process, the issue generated strong demand and was nearly twice oversubscribed. The issue was broadly distributed to institutional investors, including banks, pension funds, and asset managers. The issue also attracted significant international interest with offshore investors allocated about one third of the issue.
ADB’s baht bond issue represents many firsts in the Thai capital market: first issue by a foreign entity; first supranational issue; and first issue rated triple-A by Fitch, Moody’s, and Standard & Poor’s.
“After ADB’s market opening transactions in India and Malaysia last year, the Thai baht bond issue represents another milestone in ADB’s quest to develop regional bond markets,” says ADB vice-president Khempheng Pholsena. “The bond issue also underscores ADB’s confidence in the Thai capital market. This, together with the new standards created through this issue in terms of regulatory framework and documentation, will facilitate issuance by other international borrowers in Thailand.”
In addition, the issue will help attract international investors to the Thai bond market as well as enhance liquidity in the cross-currency swap market. ADB has executed related cross currency swap transactions to convert the bond proceeds into US dollars.