TMB Bank of Thailand will buy back most of its offshore
subordinated bonds, it said last week, adding to the growing
number of Asian borrowers seeking to cancel international
Continent-wide, banks and corporates faced with soaring
borrowing costs and falling revenues are shifting out of
international liabilities they had piled up in the boom.
TMB is to purchase $131.2 million of its own deeply
subordinated hybrid tier one bonds, redeeming more than half of
the $200 million perpetual notes it sold in 2006. It will pay
investors just 57% of the bonds face value, after demand
for them slumped in the wake of the banking crisis.
Cathay United Bank of Taiwan and Macquarie of Australia have
each launched similar liability management exercises in recent
weeks, while corporate borrowers have also been quick to reduce
their foreign debt.
Nine Dragons Paper, the Chinese recycling and cardboard
company, sold $300 million of five-year bonds in April 2008 as
it sought to raise funds for expansion, but returned to
investors in February with an offer to buy back the entire deal
at 53% of face value. Hong Kong-listed casino operator Galaxy
Entertainment also bought back bonds in December, after scaling
back its construction projects in Macau.
Most analysts expect that the number and scope of buybacks will
continue to increase in Asia. But as secondary markets improve,
the opportunity to buy back at a steep discount is falling. It
can still make sense, but buybacks this year are likely to come
more and more frequently from companies in distress.
Brayan Lai, a credit analyst at Calyon in Hong Kong, said that
debt buybacks in Asia are split between two groups: first,
distressed offers that often contain covenant strips and tend
to be mainly in the high-yield space; and, second, more
The distressed offers include a proposal by Asia Aluminum, a
Chinese metal producer, to buy back around $1.1 billion of
international debt at a maximum of 27.5% of face value in
March. Bondholders rejected that restructuring, forcing the
company to appoint administrators. Taiwans ProMOS
Technologies, the struggling semiconductor manufacturer,
redeemed convertible bonds worth $336 million early last month,
after investors agreed to an offer worth 25% of par value.
Florian Schmidt, head of debt capital markets for Asia at ING
in Singapore, told Emerging Markets: Very few industries
are finding it easy to deal with leverage at the moment.
Buybacks will remain a big subject as long as earnings remain
Corporate earnings have fallen dramatically, to the
extent that coupon payments have become a problem for highly