Logo of Phnom Penh Post newspaper Phnom Penh Post - Corporate bonds edging closer to launch

Corporate bonds edging closer to launch

Corporate bonds edging closer to launch

Cambodia's market regulator has finalised regulations for establishing a corporate bond, moving one step closer to introducing a new capital market tool that would allow companies to raise funds for expansions, debt refinancing or acquisitions, officials announced yesterday.

In a press release, the Securities and Exchange Commission of Cambodia (SECC) said it had approved three initiatives that solve the remaining regulatory hurdles for bond issuance, bond representatives and allowing credit rating agencies to provide ratings.

Sou Socheat, director-general of SECC, told The Post that now that the government has established regulations for a corporate bond market, those seeking to issue bonds can submit a letter of intention
to the market regulator for approval.

“I believe that there will be many companies that want to issue bonds as it provides them more options to raise funds without changing the structure of equity in the company,” Socheat said, adding that SECC was looking for a first-mover to demonstrate the viability of a Cambodian bond market.

“There will be also many public investors who are willing to buy corporate bonds, if issuers offer good interest rates,” he added.

SECC has identified three different types of corporate bonds it would potentially issue, including a secured bond, guaranteed bond and a plain bond, providing an international credit rating agency can give them a value.

Socheat added that SECC will closely monitor the issuer to ensure their ability to repay the bond’s face value and distribute interest payments regularly.

Han Kyung Tae, managing director of Yuanta Securities, said he was pleased that the government has finally made tangible progress in establishing a local bond market. He added that a diversified product line would help the sluggish local capital market garner more interest from investors.

“I believe there will be some potential issuers as well as investors interested in the new opportunity,” he said. “Financial companies in the banking sector, one of the fastest growing sectors, may be interested in diversifying their funding sources in particular for their long-term debt financing.”

Han added that since the bond prices will be based on the soundness of the business, which is generally measured by credit ratings, a government bond would normally be used as the barometer for bonds issued by companies.

However, he added that despite Cambodia not having government bonds, with a “proper and reliable credit rating system in place” the issuance of a corporate bond “wouldn’t be an impossible obstacle”.

He also added that given the highly dollarised economy it would make sense to issue bonds in US dollar instead of trying to promote riel bonds, as future cash flows will continue to be based on the US dollar.

MOST VIEWED

  • EU parliament’s 13-point vote to decide on possible sanctions

    The European Parliament is due to vote on Thursday on a 13-point resolution on Cambodia – which includes a call for the treason charges against bailed opposition leader Kem Sokha to be dropped – a threat that could see the EU enforce a range of sanctions against

  • Government hits back at threats to pull EBA, suspend UN seat

    The spokesman for the ruling Cambodian People’s Party (CPP) has said the government is in no way concerned after the European Parliament gave it three months to reverse what it called the “systematic repression of the political opposition”. Ignoring the ultimatum could mean facing

  • Sar Kheng: Sokha requested security

    Interior Minister Sar Kheng on Sunday revealed the story behind the transfer of former opposition party leader Kem Sokha from Trapaing Phlong prison in Tbong Khmum province to his house in the capital. Speaking at the ruling Cambodian People’s Party (CPP) headquarters in Prey

  • PM vows to ‘protect’ Chinese interests

    Prime Minister Hun Sen on Tuesday told Chinese companies investing in Cambodia not to worry about contract cancellation in the Kingdom. Speaking at a roundtable meeting with business executives in China as co-chair of the China-Asean Expo, the prime minister told six Chinese conglomerates with