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Cutting costs, managing cash

Leading property firms plan to issue debentures and launch property funds and real-estate investment trusts worth nearly Bt100 billion this year, in order to reduce their financial costs and manage cash efficiently during the market slowdown.

A survey by The Nation found that Pruksa Real Estate plans to issue a debenture worth between Bt5 billion and Bt7 billion, with part of the amount being the roll-over of some of an earlier debenture due to expire this year. Some of the proceeds from the new debenture will be put towards the developer's cash flow.

The debenture will enable the company to manage its interest cost at just 3.8 per cent per annum, lower than the market average.

Land & Houses plans to issue an Bt8-billion debenture this year, as well as a property fund worth at least Bt10 billion.

This will maintain its financial cost at 4 per cent, or perhaps even lower.

Sansiri will issue a Bt4-billion debenture, with some of the proceeds being used to pay back a debenture that expires by year-end, and the rest to be used as cash flow.

AP (Thailand) plans to issue a debenture worth Bt1.5 billion by the middle of the year, while Property Perfect is studying the issuance of a debenture and a property fund together worth up to Bt3 billion.

Real-estate investment trusts are also on developers' radar.

Thai Bond Market Association managing director Niwat kanjanaphoomin said the ongoing political turmoil would affect overall Thai debenture issuance this year, as companies they would face a 1-percentage-point higher interest cost than last year due to domestic and foreign investors' concern about the political risk for business.

However, the interest-rate cost will still be lower than borrowing from a bank, he said.

The association estimates the corporate sector will issue debentures worth between Bt400 billion and Bt420 billion this year, roughly the same as last year's Bt418 billion.

The main issuers will be energy firms, property developers and contractors, he said.

"Some of the debenture funds raised will be spent to pay back debentures that expire this year, and a part will go towards their cash flow," he said.

Debentures worth Bt240 billion are due to expire during the course of the year, Niwat added.


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