Yoma Strategic Holdings raised USD $ 70 million from Thai institutional investors in the first foray of a Myanmar- focused company into the corporate bond market

Yoma Strategic Holdings has raised THB2.3 billion (US$70 million) from Thai institutional investors in the first foray of a Myanmar-focused company into the corporate bond market.

The Serge Pun-chaired company this month announced that it had filed a bond offering of THB2.3 billion, which is equivalent to the maximum approved guaranteed amount of US$70 million on the day of pricing, with the Securities and Exchange Commission of Thailand (SEC). The issuance took place on January 25.

The bonds were more than 2.5 times oversubscribed by Thai institutional investors. The five-year fixed rate bonds are priced at 3.38 percent per annum, which represents a premium of 124 bps above Thai government bonds.

The bonds are rated triple A by virtue of them being guaranteed by the Asian Development Bank’s Credit Guarantee and Investment Facility (CGIF).

In an interview with The Myanmar Times, chief financial officer JR Ching said the bonds have a “higher level of environmental and social consideration just given the fact that CGIF is involved.”

Source of funds

Yoma is diversifying its sources of funding by tapping Thai bond investors for liquidity at a time when trading on the Singapore Stock Exchange, where Yoma is listed, is slowing. Shares of Yoma are currently down by about a third, to 34.5 Singapore cents each, compared to a year ago.

By issuing corporate bonds, the company will be able to target institutional investors, such as pension funds and insurance companies, who are looking at longer tenure transactions than stock traders, Mr Ching explained.

The bond issue will help Yoma secure more funding, while raising its value among equity investors. “Hopefully, it will, overall, strengthen participation on the equity side as well,” Mr Ching said.

The strong liquidity in the Thai market and low interest rates make Thailand an attractive destination for issuing bonds, he added. There is also a strong familiarity between the Thai and Myanmar business communities. It is easier and a smoother process for Yoma to launch the offering in Thailand than other international capital markets.

In May 2018, Thailand’s finance ministry granted Yoma and three other foreign companies, EDL-Generation Public Company, Export-Import Bank of Korea and Malayan Banking, permission to issue baht-denominated bonds and to take the proceeds abroad. The minister’s aim is to deepen Thailand’s domestic bond market.

The move will increase the gearing - the level of a company's debt related to its equity capital –to around 30 percent this year, he added. As at 30 September, 2018, the company owed a total of S$313.3million. At those levels, the company is 23.8pc geared.

The net proceeds from the offering will be used for Yoma’s business expansion and general corporate purposes, the company said in a press statement, including refinancing existing debts and funding capital expenditures. It has four portfolios: food-and-beverage franchising, real estate development, automotive and heavy equipment business, and non-bank financial services. The all-in financing costs for the bonds will be lower than Yoma’s current average rate of borrowing.

Deeper capital markets

More broadly, Yoma’s Thai bond issue also represents a step forward for the Asean capital market. “Myanmar is one of the few countries in Asia without a sovereign rating, which makes our AAA issue rating a significant milestone for Yoma as well as for the economy,” Yoma’s CEO Melvyn Pun said.

It is also the first time for CGIF, with paid-in capital of US$859.2 million from ADB, to be a guarantee for a Myanmar-focused business. For CGIF’s CEO Kiyoshi Nishimura, the transaction “single-handedly fulfils multiple aspirations”: that of the Thai government to encourage its neighbouring countries to access the baht bond market, that of Yoma to finance its long-term investments in the growth sectors of Myanmar with long-term, fixed-rate debt and lastly that of CGIF, whose stakeholders envisaged increased intra-regional flows of the abundant savings accumulated.”

Bangkok-based advisory firm Twin Pine Group Company Ltd is the sole adviser and Bangkok Bank is the sole arranger for the bond issuance. Adisorn Singhsacha from Twin Pine emphasised that Yoma is the first Myanmar-based company to raise funds in the Thai capital market.

(The Myanmar Times: https://www.mmtimes.com/news/yoma-strategic-raises-us70-million-debut-bond-sale.html )

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