By Kit Yin Boey
The Lao People's Democratic Republic will print its first international bond tomorrow after it successfully sold a THB1.5bn ($50 million) three-year bond.
The transaction will also be the first unrated sovereign or quasi-sovereign credit to be issued in the baht-denominated bond market, and will support Thailand's aim to establish its image as a viable regional debt capital hub.
The notes were priced at a yield of 4.5 percent, giving local investors a spread of about 175bp over the yield of three-year Thai government bonds, based on yesterday's rates.
Earlier this year, Thailand's Ministry of Finance had said it granted Laos approval to issue baht bonds as a contribution to the Asian Bond Markets Initiative and the Asean Economic Community blueprint that aims at improving economic relations in the region.
The Laos deal demonstrates that there is institutional appetite for a high-yielding name, and will set a template for other regional sovereigns such as Cambodia, Myanmar and Vietnam seeking an alternative to the US dollar bond markets.
In an effort to promote the Laos deal, the Thai government removed a number of barriers, including the waiver for a required rating.
The Laotian sovereign has talked about an issue in Thailand for a number of years, but it was only last year that steps were taken to sell the bonds. The Securities and Exchange Commission of Thailand cleared one barrier for a Laotian Government bond last June, when it approved the sale of unrated paper.
The last hurdle was removed when the Thai Ministry of Finance relaxed a rating requirement specifically for foreign governments or issues with a foreign government guarantee.
Previously, only foreign issuers - be they sovereigns or corporates - with an investment-grade rating could apply for the approval. However, last September, the Thai Ministry of Finance waived the investment-grade rating requirement for sovereigns or entities wrapped with a sovereign guarantee.
TMB Bank was the sole lead manager, and Twin Pine Consulting was the final adviser for Laos.
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