Sole mandated arranger ABN AMRO has launched Thai Military Bank's (TMB) $80 million loan into sub-underwriting to a select group of banks. The three-year bullet deal has a $20 million greenshoe and pays a spread of 67bp over Libor. The deal offers co-arrangers 76bp all-in including 20bp upfront fees and 7bp underwriting fees.
General syndication for the facility will be launched around July 25 following the close of sub-underwriting. The deal is likely to receive a lot of interest from foreign banks given the scarcity value. Not many syndicated loans have emanated from Thailand post-financial crisis.
The most recent was a $40 million one-year club deal for Siam City Bank signed in May 2002. Rated Ba2 by Moody's at the time of signing, Siam City Bank's loan, lead arranged by Natexis, saw participation from seven other foreign banks. The deal was upsized from an original size of $30 million and, according to some bankers, the pricing was also reduced from 80bp to 65bp over Libor.
Whether or not TMB's deal will meet with the same success depends largely on country limits available at foreign banks. Although the deal size is small, a lot of foreign banks will have to take into account the 100% risk weighting they would have to assign to a loan asset from Thailand, a non-OECD country. Under BIS guidelines, a similar-rated Korean bank's loan would be assigned a 20% risk weighting. Rated Ba2 by Moody's, TMB is the sixth-largest bank in Thailand.
Foreign banks looking to participate in the transaction should find pricing attractive. In May 2002, Malaysian bank Bumiputra Commerce tapped a three-year bullet loan for $128 million at a spread of 50bp over Libor. At the time of signing the loan, Bumiputra was rated Ba1 by Moody's and was subsequently upgraded to Baa3. Bumiputra's deal was also oversubscribed and upsized from an original sixe of $100 million.
With the Thai economy showing signs of improving, Thai banks will be looking to increase lending and thereby increase their profitability. According to Thai Rating and Information Services (TRIS), approximately 85% of TMB's total earning assets are loans extended to manufacturing, commercial and personal consumption sectors. As at the end of May 2002, TMB's non-performing loan (NPL) ratio stood at 11.59%, a marginal improvement over the 11.8% at the end of March. TMB had a capital adequacy ratio (CAR) of 12.2% at the end of March 2002, of which Tier I capital ratio was 7.6% and Tier II capital 4.6%.
