ThaiBev taps baht bond market with $2b offering, to refinance Sabeco acquisition debt

Billionaire Charoen Sirivadhanabhakdi, chairman of Thai Beverage Pcl, speaks with guests as he attends a charity event in Bangkok, Thailand, on Wednesday, Oct. 15, 2014. Photographer: Dario Pignatelli/Bloomberg

Thai Beverage is returning to the baht market with an ambitious plan to raise at least Bt70 billion ($2.1 billion) in Thailand’s largest corporate bond issue, just five months after its latest Bt50 billion financing.

While it found robust demand in March, the Thai beer maker’s latest financing will test the limits of a local institutional investor base that is steeped in Buddhism, which discourages drinking alcohol.

“There will be some institutional investors which can take exposure to Thai Beverage, but we are not interested in the credit,” said one investor at a mutual fund. “Its liquor business does not comply with our social and responsible governance standards.”

The investor said such compliance became a larger factor for his fund after the Securities and Exchange Commission of Thailand provided more guidelines last year to institutional investors on responsible and sustainable investment management.

Religion was a major hurdle for Thai Beverage when it twice sought to float shares on the Stock Exchange of Thailand, before eventually cancelling its plans in the face of intense protests. The company listed in Singapore in 2006.

This time around, however, Charoen Sirivadhanabhakdi’s drinks giant will not offer the securities to retail investors, even though individual buyers make up as much as half of the Thai corporate bond market.

Instead, ThaiBev is leaning heavily on its seven joint lead managers to reach out to institutional investors and high-net-worth buyers. Bangkok Bank, Bank of Ayudhya, Kasikornbank, Krungthai Bank, Phatra Securities, Siam Commercial Bank and Standard Chartered Bank will reprise their roles from the March deal as leads. The banks are believed to be underwriting a large portion of the bonds.

“We took into consideration in the last deal that some institutional investors, especially the government-owned pension funds, cannot invest in liquor assets,” said a banker on the deal. “The same will apply in this case but we will have to work ever harder to meet the larger target size.”

Tenors of two years to 10 years are being explored with bookbuilding tentatively scheduled for early September, when no other large bond offerings are currently planned.

At a minimum size of Bt70bn with an undetermined greenshoe, the new deal will surpass the largest corporate offering from Berli Jucker, which raised Bt54bn in August 2016 to support its acquisition of Big C Supercenter.

Sabeco Stake

Proceeds from the new offering will refinance $5 billion of bridge loans backing ThaiBev’s $4.84-billion acquisition of a 53.59% stake in Vietnam’s Saigon Beer-Alcohol-Beverage Joint Stock Corporation (Sabeco), which produces Saigon Beer and 333.

The bridge loans, including a $1.95-billion, 12-month bank loan obtained from Mizuho Bank and Standard Chartered, were extended in January this year.

The purchase of Sabeco had prompted rating agencies to downgrade ThaiBev’s corporate ratings. Moody’s demoted ThaiBev in February from Baa2 to Baa3 with a negative outlook, citing a “significant shift in the company’s financial risk appetite”, while Tris lowered its rating to AA from AA+.

Financial results released last week for the third quarter ending June 30 2018 saw earnings fall 61% year-on-year while core profit eased 11% to Bt6 billion, despite a 34.1% rise in group revenues to Bt60.7 billion following Sabeco’s inclusion.

Despite the weak results, several equity analysts have a buy recommendation on the company as they believe that Sabeco’s business will be a long-term positive addition to the group.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.