The first Cambodian corporate bonds to be issued by microfinance firm Hattha Kaksekar Ltd (HKL) have been completely purchased by institutional investors when subscription ended on Tuesday.
This enabled it to raise 120 billion riel ($30 million) for the growth of its lending business.
Underwritten by SBI Royal Securities, the bonds were subscribed with an interest rate of 8.5 per cent per annum (semi-annual payment) with a three-year maturity. A total of 1.2 million bonds were issued, valued at 100,000 riel per unit.
‘There is still demand’
SBI Royal Securities managing director Seng Chan Thoeun said on Wednesday that the bond is expected to be listed on the Cambodia Securities Exchange (CSX) on December 5.
He said the list of bondholders is ready to be submitted to the Securities and Exchange Commission of Cambodia (SECC) for approval before the listing application is submitted to the CSX.
“There is still demand for the bonds. The corporate bonds market can easily find investors,” he said, adding that the interest rate for HKL’s bond is attractive for institutional investors.
“Many individual investors have contacted us to buy the bonds, but institutional investors have already bought it all.”
Chan Thoeun said many microfinance firms and Cambodian small- and medium-sized enterprises (SMEs) have shown interest in issuing bonds and are preparing to enter the market.
For HKL’s bonds, the World Bank’s lending arm, International Financial Corporation (IFC) becomes a cornerstone investor, pumping in $20 million or 66 per cent of the total HKL bond issue.
Vattanac Bank is the other lead investor, taking up $5 million worth, while the remaining bonds are being purchased by commercial banks and insurance firms.
HKL will become the sixth company to list at CSX.
Chan Thoeun said the trading activity of corporate bonds depends on the fluctuation of interest rates of deposits at financial institutions.
Generally, when the interest rate on deposits at financial institutions is lower, investors find buying bonds more attractive.
In contrast, when interests rates for deposits increase, investors will find corporate bonds less attractive.
CSX Listing and Disclosure Department director Lamun Soleil said on Wednesday that corporate bonds generally have less trading activity compared to the stock market as bondholders can reasonably expect an interest rate gain.
However, he said CSX has been talking to IFC about selling some bonds to retail investors when it is listed. This is due to worries that there is heavy demand from buyers but there is no seller.
“There are many companies which have shown interest and want to issue bonds, especially financial institutions.
“The number of bond issues and listings [at CSX] could be equal or might be more than the number of stock listings by next year,” he said.