Firms, banks to keep tapping funds abroad: RBS

More M&A deals after record world bond issuances in 2012

Thai corporates and banks are expected to raise more funds abroad this year to finance merger-and-acquisition deals after setting a new record for international bond issuances in 2012, said Augusto King, head of debt capital markets at Royal Bank of Scotland (RBS).

Until last year, Thai corporates issued debt in international capital markets worth an average of US$1 billion to $1.5 billion (about Bt30 billion to Bt45 billion) per year, he said at a press conference yesterday.

"Last year we [saw] a record year for Thai corporate and bank issuances in the international debt capital markets … exceeding $5 billion in total volume," King said.

One of Thailand's most prominent companies, Thai Oil, completed a transaction on Thursday, so year-to-date issuance volume already stands at $1 billion, he said.

King expects the increased tapping of international markets this year to be driven by corporates and banks looking for overseas M&A opportunities, particularly outside the region.

When issuing international bonds, it is important that you have overseas positions and non-baht revenue that can be used to service your US dollar bonds, King said. "It would be risky for Thai corporates that don't have non-baht revenue to issue US dollar bonds, as you are totally exposed to currency fluctuations."

Thai firms issuing debt in international bond markets must abide by overseas requirements, and they do have dollar-based revenue. This allows them to have foreign debt on their balance sheets, King said.

Other factors encouraging Thai firms to issue US dollar bonds include low interest rates, and the fact that foreign investors feel comfortable with Thai companies, he said.

RBS could help Thai clients raise funds abroad as the bank has a network in 38 countries, King said.

Charly Madan, RBS's country executive for Thailand, said he was not worried that Thai firms would overextend themselves in terms of overseas borrowing, as they did before the 1997 financial crisis.

Thai firms and banks have learned the lessons of being over-leveraged, he said.

He forecast that the exchange rate would be highly volatile this year, as the Kingdom is currently seeing large capital inflows and outflows.

Asked about the risk of rapid appreciation of the baht, he said he believed the Bank of Thailand could manage the exchange rate well, as it has in the past.

"I do not foresee [the imposition of] capital controls by the central bank in the current scenario," he said, when asked whether he was worried about possible BOT measures to prevent a rapid appreciation of the Thai currency.

He said he was optimistic about the Thai economy, including the outlook for exports, as the United States had started to recover and financial markets in some European countries had stabilised.

RBS forecasts that Thai gross domestic product will expand in a range of 4.7-5 per cent this year, reflecting the strong base in the fourth quarter of last year.

RBS's core businesses are debt financing, risk management and transaction services.