Guarantee for Baht Bonds Issued by a Japanese Affiliate in Thailand
Supporting Japanese Affiliates' Increasingly Diverse Financing Modalities and Development of Local Bond Market
- Area: Asia
- Manufacturing and Services
- Japan Bank for International Cooperation (JBIC; Governor: Koji Tanami) provided a guarantee today for the baht-denominated bonds issued by AEON Thana Sinsap (Thailand) Public Company Limited (ATS; Head Office: Bangkok), a Thai corporation in which AEON Credit Service Co., Ltd. has equity stakes.
- This guarantee is aimed at helping ATS to raise funds through issuance of corporate bonds totaling 1 billion baht (about 3.4 billion yen), which is guaranteed by Mizuho Corporate Bank, with JBIC providing a secondary guarantee. The portion of funds raised from this issue and covered by JBIC's secondary guarantee will be used for the company's sales finance for Japanese two-wheeled motor vehicles in Thailand. This is the second guarantee that JBIC has provided in support of Japanese affiliate's bond issuance in Thailand. (For a schematic illustration of this, see Appendix)
- While efficiently expanding business in recent years, ATS has been active in diversifying financing instruments. In many Asian countries, however, underdeveloped bond markets have made it difficult for Japanese companies to raise funds with bond issuance. Even in Thailand, where the bond market is relatively mature, Japanese firms with good credit standing do not necessarily have high name recognition in local securities markets and sometimes face similar difficulties. This is where the support of JBIC, a Japanese official financial agency, comes in handy to complement their credit standing. JBIC supports Japanese affiliates' successful bond issue by utilizing its guarantee facility, thereby contributing to the diversification of Japanese affiliates' financing modalities, as well as to the development of the local bond market.
- JBIC has been active in promoting the Asian Bond Market Initiative (ABMI),*1 which was proposed by the Government of Japan in December 2002 and under which various efforts to develop bond markets have been underway within the framework of ASEAN+3 (Japan, China and Korea).*2 As part of efforts to advance ABMI, JBIC provided a guarantee for bonds issued by a Japanese-affiliated company in June, 2004, and issued Thai baht bonds/provided a loan in September, 2005, before providing this guarantee. JBIC's latest move is expected to contribute to an improved environment for Japanese affiliates' overseas business activities through the development of bond market in Thailand.
- *1The Asian Bond Market Initiative was launched as a measure to prevent the recurrence of the Asian currency crisis by channeling funds in the Asian region, which is characterized by a high saving rate, towards investments within the region. Currently, discussions are underway among the governments of ASEAN+3 (Japan, China and Korea) countries on ways to develop and invigorate bond markets in Asian countries.
- *2JBIC's business activities under the ABMI are as follows:
June, 2004 : Provided a guarantee for Thai baht bonds issued by a Japanese affiliate in Thailand.
December, 2004 : Provided a guarantee for Korean collateralized bond obligations.
September, 2005 : Issued Thai baht bonds in the Thai market and provided a baht-denominated two-step loan to Japanese banks, the funding of which came from the baht bonds thus issued.
January, 2006 : Provided a guarantee for ringgit bonds issued by a Japanese affiliate in Malaysia.
March, 2006 : Provided a guarantee for rupiah bonds issued by a Japanese affiliate in Indonesia.
March, 2007 : Provided a guarantee for rupiah bonds issued by a Japanese affiliate in Indonesia.
October, 2007: Provided a guarantee for ringgit bonds issued by a Japanese affiliate in Malaysia.