BAY to issue subordinated debenture to beat Basel III costs

Economy October 10, 2012 00:00

By The Nation

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Bank of Ayudhya, the fifth-largest commercial bank in terms of total assets, will issue a 10-year unsecured subordinated debenture worth Bt20 billion to support long-term funding and reinforce its Tier 2 capital before the capital-adequacy guidelines unde

Kris Chantanotoke, executive vice president |of Bank of Ayudhya (BAY), said the debenture issue was expected to be less interesting because Basel III, which will be implemented |on January 1, requires sub-debt, which is part of Tier 2 or supplementary capital, not to offer redemption incentives or issue step-ups to |buyers.

Kris said sub-debt was a fund mobilisation tool apart from deposits, which help support the bank loans and business expansion in the medium to long term.

"Several banks have issued debentures this year because the cost of funding from sub-debt next year will be higher because of Basel III. We therefore decided to issue the sub-debt before Basel III is effective," he added.

Fitch Ratings (Thailand) has assigned the upcoming 10-year unsecured subordinated debentures of up to Bt12 billion a national long-term "A+(tha)" rating. BAY will have an option to sell a further Bt8 billion of debentures. The proceeds will be used for general corporate purposes.

The 10-year sub-debt issue is offering a coupon rate of 4.65 per cent per annum to |general and institutional investors from October 29 to November 6 through BAY branches nationwide.