Ananda Development Pcl (ANAN), the Thai builder that planned to sell the first-ever Dim Sum bonds with no fixed maturity, has pulled the offering as proposed yields failed to meet the company’s expectations.
The developer, which constructs condominiums near Bangkok subway stations, started marketing the unrated notes last week at about 9.5 percent, a person with knowledge of the issue said at the time. That sale now isn’t going ahead because pricing didn’t meet company expectations and Ananda has no urgent need for money, two people with knowledge of the matter said today, asking not to be identified because the details are private.
Ananda Development was attempting to sell bonds at a time when investors are pulling money from the nation as protests escalate over a government proposal to grant amnesty to people involved in political clashes since 2006. A Finance Ministry official said yesterday that the government’s plan to restart dollar bond sales is in part contingent on political tensions easing. Average yields on 10-year Thai notes have climbed 0.11 percentage point in the past month and touched 3.99 percent Nov. 1, the highest since Sept. 23.
“The Thai government has to instill confidence in investors that this amnesty program isn’t going to happen,” Robert Abad, who helps manage $51 billion in emerging-market debt at Western Asset Management Co., said in a telephone interview. “It’s already leading to protests, and could lead to further investor concern.”
Thailand’s Senate is set to reject a proposed amnesty law for political offenses on Nov. 11 after weeklong street protests raised concerns its passage would reignite political violence. Opposition from the public, universities and business groups convinced a majority of Thailand’s 149 senators to block the legislation, Senate Speaker Nikom Wairatpanij said at a media briefing in Bangkok yesterday.
More than 32,000 people joined demonstrations in the capital and 17 other provinces Nov. 4, according to police estimates. The legislative failure would be a setback for Thaksin Shinawatra, who was ousted as prime minister in a 2006 coup and has guided policy from abroad since his sister, Yingluck, won elections in 2011. Yingluck struggled to convince the public that the bill aimed to heal social divisions rather than help Thaksin return to Thailand and recover part of a fortune seized after he fled a jail term in 2008.
Foreign investors have sold $393 million more local bonds than they bought since the beginning of last week through Nov. 4, Thai Bond Market Association data show.
Ananda Development, which is yet to sell foreign-currency bonds, chose to offer yuan-denominated debt as swapping the proceeds back to baht would be more economical than switching dollars, a person with knowledge of the matter said last week. Perpetual bonds, which due to their equity-like features carry accounting, tax and ratings benefits, would have helped the company maintain its debt-to-equity ratio, the person said.
“This is not necessarily the right issuer to be selling this type of security with that structure,” Hayden Briscoe, an Asia-Pacific fixed-income director at AllianceBernstein Hong Kong Ltd. said last week, before the sale was shelved.
Ananda Development had planned to sell its bonds as soon as Oct. 31, a person with knowledge of the matter said at the time.
Chinese and Hong Kong issuers increased their share of the offshore yuan market to 64 percent this year, excluding certificates of deposit, up from 58 percent in 2012, data compiled by Bloomberg show.
Borrowers pay an average 5.53 percent to sell junk and unrated Dim Sum debt, 177 basis points less than speculative-grade companies in Asia pay for notes in the U.S. currency, HSBC Holdings Plc indexes show. A basis point is 0.01 percentage point.
The planned coupon for Ananda Development’s Dim Sum bonds would have been the highest on offshore yuan securities since Flying Financial Service Holdings Ltd., a Chinese pawn loan provider, sold debt in August, Bloomberg data show. Only 10 percent of Dim Sum bonds issued this year pay a coupon of more than 7 percent.
Thailand’s government will offer $1 billion to $1.5 billion of five- or 10-year securities in 2014 and will market notes denominated in the greenback every year over the next decade, Chularat Suteethorn, the head of the Finance Ministry’s public debt management office, said yesterday. The timing of next year’s sale will depend on whether political tensions abate, and on the outlook for U.S. interest rates and the baht, she said.
Thailand’s top-performing equity fund manager has reduced holdings of domestic shares on expectations that protests against the government’s amnesty bill will spur prolonged political conflict and curb economic growth.
BBL Asset Management Co., which runs seven of the 10 best-performing Thai equity funds during the past three years, has raised cash holdings since mid-October, Voravan Tarapoom, chief executive officer at Bangkok-based BBL, which oversees about $10 billion, said in an e-mail. The benchmark SET Index plunged 2.9 percent Nov. 4, the most since Sept. 23.
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