Bangkok Post – Warning issued to corporate bond investors

The Thai Bond Market Association (ThaiBMA) is urging investors to study related information cautiously before investing in corporate bonds, saying a number of companies have yet to recover from the impacts of the Covid-19 pandemic.

Since the beginning of this year, three companies have missed the payment of debentures worth a combined 12.1 billion baht, said the association’s executive vice-president Ariya Tiranaprakit.

Some other companies have been unable to meet the payment schedule but have reached an agreement with the bondholders to either reschedule the payment or adjust the interest rate payment, she added.

“Since the beginning of the year, sentiment in the debenture market is not bright and the confidence has been shaken given that companies are not able to meet their debt obligations. Also, there are cases from previous years that have not been able to settle the issue,” Ms Ariya said.

According to the information available on the ThaiBMA website, seven companies missed payment schedules of the 23 tranches of bonds in total, worth more than 19 billion baht as of Aug 31 this year. Among those are Stark Corporation, which involved five tranches of bonds worth nearly 9.2 billion, All Inspire Development, which involved seven tranches of bonds worth 2.33 billion baht, and JKN Global Group (JKN), which recently said it could not fully pay a tranche of bonds worth roughly 607 million baht.

The others are Asia Capital Group, Apex Development (APEX), Inter Far East Energy Corporation (IFEC), and Destination Resorts.

“Several companies have suffered an impact from the protracted Covid-19 pandemic and they have not recovered yet. So, when the economy is not good like nowadays, they are facing a liquidity shortage. These are good companies. We also see companies that have carried out accounting fraud and they have a problem in repaying debts,” Ms Ariya said.

JKN, for example, indicated that they have been faced with a liquidity mismatch partly caused by the current economic condition, she explained.

According to Ms Ariya, high-yield bonds and debentures issued by small and medium-sized companies are struggling to attract investors. Meanwhile, bonds issued by big corporations, including PTT, SCG and large banks, are gaining popularity.

“We recommend investors look into the information carefully in all aspects for their investment decision, so not only are the bonds rated by rating agencies or not, but also the capability of the bond issuers in generating enough cashflow to repay debts,” she noted.