LOLC (Cambodia) Plc is set to become the second issuer of corporate bonds in Cambodia after obtaining an approval for bond issuance from the National Bank of Cambodia (NBC) on Friday, the company revealed on Monday.
Unlike previous corporate bonds, LOLC’s offer investors not only fixed-coupon bonds but also those indexed to foreign exchange markets (forex) – with an interest rate that varies according to foreign currency exchange rates.
LOLC plans to raise 80 billion riel ($19.96 million) through the issuance of its first corporate bonds on the Cambodia Securities Exchange (CSX). The bonds will have a tenure of three years and their final coupon rate will be determined before the subscription period ends.
“We are so glad that we’ve obtained the NBC’s approval on our first bond issuance and that we are able to introduce a new product – forex-indexed bonds – to the market."
“Diversifying our sources of funding, particularly long-term funding, will ensure the institution’s future growth as well as improve its financial position,” LOLC chief executive officer Sok Voeun said.
After obtaining a no-objection letter from the NBC, LOLC will submit the Listing Eligibility Review Application form to CSX and then submit an Application Form for Public Offering of Debt Securities, a disclosure document and other relevant documents to the Securities and Exchange Commission of Cambodia (SECC) to obtain approval.
The listing date for the bonds is expected to be in late March or early April.
Both fixed-coupon and forex-indexed bonds are fully in line with the government’s policy of promoting the use of the local currency, as they are both denominated in Cambodian riel, as will the payments of the bonds’ interest and principal.
Yuanta Securities managing director Han Kyung-tae, LOLC’s adviser and underwriter for the bond project, said forex-indexed as well as inflation-indexed features were common in Latin America and greatly contributed to their bond market development in the late 1980s until the early 2000s. During the period, they almost exclusively issued both government bonds and corporate bonds with such features.
“We believe the forex-indexed bond is a particularly useful product for Cambodia during this transitional period whereby the market will look to achieve two goals – promoting the Cambodian riel and attracting both riel and USD investors to the local capital market,” he said.
Han added that LOLC’s bonds are over-subscribed.
CSX chief operations officer Ha Jong-weon said the news of a second bond issuer proves that diversifying sources of funds among Cambodian companies from the Kingdom’s capital market is a good move.
“In the short term, at least this year, many financial institutions would like to issue bonds due to tax deductions,” he said.
“In the long term, they would like to issue equities through the securities market to save the cost of funds with serious competition in the financial market.”