The new deal, completed less than a fortnight after its original was withdrawn following ThailandÆs coup, is a $220 million perpetual priced at par with a coupon of 7.378%, equating to a spread of 280bp over 10-year US Treasuries.
Merrill had gone out with a guidance of 280bp to 285bp over US Treasuries, which was 15bp to 20bp wider than that of the original $200 million deal. The wider spread was generally seen as an add-on for investors for the inconveniences incurred in the previous deal.
Indeed, the deal is clearly investor friendly, and if Krung Thai was looking for absolution, they got it. When the order book closed early Thursday evening, it was oversubscribed by two times and a total of 50 accounts had been allocated paper. Of those 50 accounts, 75% were investors who had bought into the earlier deal.
If the retention of the initial investor base is a strong signal that the deal was handled correctly, the fact that the deal is already trading markedly tighter with a bid/offer spread of 272bp to 275bp over is a glowing endorsement.
Although some in the market were circumspect that the timing was a little too premature, Merrill can pat itself on the back for making the most of an unfortunate situation. The dealÆs timing looks sound. Treasuries rallied in sessions ahead of the deal, and then bonds retreated shortly after Krung Thai placed as early Thursday trading in New York digested a poor weekly jobless report.
At the same time, Thai five-year credit default swaps have regrouped over the last two weeks, having pushed out to between 65bp and 74bp from 32bp and 36bp following the coup. They are now sitting at around 40bp to 45bp.
Ultimately the success of the Krung Thai deal should provide some damage control for the Thai credit markets, which were left in flux following the coup. The bond deal is the first to emerge from Thailand since the military took control and proves that, at least on the debt side, the country is open for business again.
The Krung Thai paper was sold primarily to Asian accounts which took 75% of the deal. The remaining 25% went to Europe-based accounts. Funds bought 65% of the bonds, banks took 29%, and public banks took the remaining 9%.
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