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Developers prepare to issue debentures

The Nation May 26, 2009 Cash required for expansion in case of a recovery in second half Many of Thailand's leading property firms are gearing up to issue debentures in the second half of the year to support their business expansion in the light of a recovering property market. Viewed as a total sum, the listed firms will be seeking public investment of more than Bt10 billion. The drive for debenture funding is supported by lower interest rates and the fact that most of the companies have low debt-to-equity ratios. Most of them are among Thailand's top 10 developers, together holding more than 70 per cent of the property market in the greater Bangkok area - a slice of the market valued at more than Bt150 billion a year. Sansiri plans to issue three-year debentures next month with a value of Bt1 billion. The interest rate will be 6.25 per cent. Property Perfect is also planning to issue three-year debentures worth Bt1 billion next month, but with an interest rate of 6 per cent. Preuksa Real Estate's shareholders have approved a plan to issue debentures worth Bt2.5 billion, and this will probably go ahead in the fourth quarter, with an interest rate of 5-5.5 per cent. Asian Property Development's shareholders have also approved a debenture issue to raise Bt4 billion. The company may issue the debentures either in the fourth quarter or next year. It issued debentures worth Bt1 billion in this year's first quarter the company said had cut its interest costs down to an average of 4.5-5 per cent per year. SC Asset is considering a debenture issue worth between Bt1 billion and Bt2 billion towards the end of this year, and Land & Houses' shareholders have approved a debenture issue worth Bt10 billion with a maturity period not exceeding 10 years. The company may issue the debentures in the fourth quarter or next year. Sansiri president Srettha Thavisin said his company had decided to issue debentures to support its investment plan because of the long term involved in three-year maturity. This allows greater cash management flexibility than does a project loan from a bank. "Our debt-to-equity ratio will remain below 2. It is currently 1.03, and if we issue the debentures the ratio will become 1.05. That is still a healthy financial situation for our business," he said. Property Perfect CEO Chainid Ngow-sirimanee said his company would issue debentures worth Bt1 billion next month, with an interest rate of 6 per cent. This will reduce the company's cost of funds from an average 6.5 per cent to 6 per cent. "After we issue the debentures, our debt-to-equity ratio will be only 0.8, and that is healthy for our business. We'll have sufficient cash flow to build the business when we see the property market has recovered significantly in the second half of the year," he said. Asian Property Development CEO Anuphong Assavabhokhin said his company did not need to raise funds from the market because its debt-to-equity ratio was 0.93, which meant it had cash flow and some projects would get project loans from banks. However, company shareholders have approved a debenture issue worth Bt4 billion that may get a green light in the last quarter of this year or next year. This will provide financial management flexibility if the company sees significant recovery in the property market in the second half of this year, he said. SC Asset chairperson Yingluck Shinawatra said her company might issue debentures to support its plan to launch nine property projects later this year. "We're currently discussing the matter with financial advisers," she said. "Such an issue would provide cash to support our business plans." SC Asset's debt-to-equity ratio now stands at 0.42. Even if it issues debentures, the ratio will remain below 1, she said.

 

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