US fund makes move

US-based private-equity fund Lombard Asia III has expanded its investment in Thailand by buying Bt600 million worth of convertible debentures from Krungthep Land.

If the fund exercises its right fully, it will own nearly 20 per cent of the property developer, Krungthep Land CEO Thongchai Kunakornporamut said yesterday.

Lombard Asia III has the right to swap the convertible debentures, carrying a coupon rate of 5.5 per cent per annum, into Krungthep Land's common shares at an exercise price of Bt13.85 apiece within five years.

Thongchai explained the company raised funds through convertible debentures because room for its foreign ownership was not sufficient to serve Lombard Asia III's interest, due to foreign-ownership restrictions.

Krungthep Land plans to seek a listing on the Stock Exchange of Thailand in the fourth quarter, and its registered capital will then be increased from Bt2.1 billion to nearly Bt3 billion.

Following the initial public offering, existing shareholders Property Perfect and the Fraser and Neave Group will see their holdings diluted from 20 per cent and 40 per cent to 10 per cent and 30 per cent, respectively. This will open room for Lombard Asia III to hold a stake.

"Our financial situation will be strong when we have a new partner and also enough cash to expand our business this year," Thongchai said. "We need cash of up to Bt600 million to buy land to develop three new residential projects, including single-detached houses, condominiums and townhouses worth nearly Bt4 billion this year."

"We invested in Krungthep Land because we believe that the company has professional management and potential growth when the company succeeds in applying to be a listed company on the Stock Exchange of Thailand," said Lombard Investment managing director Thomas Smith.

He said the group had strong confidence in expanding its investment in Thailand in real estate, hotels, retail, finance and food, with expectations of 20-30 per cent a year on investment returns.

Established in the middle of last year, Lombard Asia III raised funds from international financial institutions like International Finance, the Asian Development Bank, the California Public Employees' Retirement System and others. Lombard Investment manages Lombard Asia III with a total asset size of US$234 million (Bt7.7 billion).

Smith said Lombard Asia III would focus on Asia, particularly Southeast Asia, which accounted for 20 per cent of the fund's asset value. Thailand is one of the fund's major investment destinations, after South Korea, China and Taiwan. The fund has also made its presence felt in the Philippines and Singapore.

The group started investing in Thailand in 1997. Its three funds - Lombard Asia I, II and III - now hold major stakes in 19 firms in Thailand, including SNC Former, Central Pattana, Thai Union Frozen Products, Somboon Advance Technology, Ticon Industrial Connection and the S&P Syndicate.

Meanwhile, Thongchai said Krungthep Land announced total sales of Bt1.8 billion, of which Bt1.7 billion was realised at the end of last year. Sales were below last year's target of Bt2.3 billion.

He also expects the company's total sales of between Bt2.5 billion and Bt3 billion will be booked as revenue of between Bt2 billion and Bt2.2 billion at the end of this year.

Somluck Srimalee

The Nation