Sherpa Hossainy's Blog

Thai firm moves to Myanmar following Laos success

Posted in ASEAN, Finance, Legal, Myanmar, Yangon by Sherpa Hossainy on July 10, 2013

Offers help to Myanmar government, state enterprises and corporations to raise capital from Thai bond market

Published in Myanmar Business Today (Vol 1, Issue 21) on June 27, 2013


Thailand-based advisory firm Twin Pine Consulting will help Myanmar corporations to raise much-needed capital from the Thai bond market after it successfully manoeuvred the Laos government to raise 1.5 billion baht ($50 million) from the coveted regional bond market, its top executives said.

The Laotian government in May issued three-year baht bonds in Thailand worth THB1.5 billion with an interest rate of 4.5 percent per annum through private placement. Twin Pine acted as the Laos government’s financial adviser. The transaction was the first unrated sovereign or quasi-sovereign credit to be issued in the baht-denominated bond market and established Thailand’s image as a viable regional debt capital hub.

“We want to help at least a couple of Myanmar companies, its government or state enterprises to raise capital from the Thai bond market. We will act as a matchmaker as we help them launch in the market. We can also get the rating agencies to come and rate them, for example the Thai Rating and Information Services (TRIS),” Adisorn V Singhsacha, managing director and partner of Twin Pine, who also has over 15 years of international banking experience, told Myanmar Business Today. The whole idea is about increasing the level of professionalism and the outreach of local companies and also Myanmar as a country, he added.

“We still haven’t identified who is going to be the underwriter for the bond, but it could be either a Thai bank or a foreign bank. For the Laos project we worked with Thai Military Bank (TMB) who worked as the underwriter,” Adisorn said.

Adisorn V Singhsacha, managing director and partner of Twin Pine.

Earlier this year, Thailand’s Ministry of Finance granted Laos approval to issue baht bonds as a contribution to the Asian Bond Markets Initiative and the ASEAN Economic Community blueprint that aims at improving economic relations in the region. In an effort to promote the Laos deal, the Thai government removed a number of barriers, including the waiver for a required rating. The Laos deal demonstrated that there is institutional appetite for a high-yielding name, and is expected to set a template for other regional sovereigns such as Cambodia, Myanmar and Vietnam.

The Securities and Exchange Commission (SEC) of Thailand cleared one barrier for the bond in June last year, when it approved the sale of unrated paper. The last hurdle was removed when the Thai Ministry of Finance relaxed a rating requirement specifically for foreign governments or issues with a foreign government guarantee. Previously, only foreign issuers with an investment-grade rating could apply for the approval.

Twin Pine was appointed as the advisor for the Laos Ministry of Finance and its legal partner LS Horizon played a major role in getting the state-owned Electricite Du Laos (EDL) listed in the newly-formed Laos Stock Exchange.

LS Horizon Ltd is a regional law firm which has offices in Laos, Singapore and Myanmar, and has plans to expand into Indonesia and Cambodia. “We’ve been helping our Thai clients through our Myanmar office to set up businesses, giving legal advice on investment. Our clients range from mining giant Bangpu, Ital-Thai Development Plc to Siam Cement and some Thai banks,” Chiridacha Phungsunthorn, a partner at LS Horizon and also partner and director at Twin Pine, told Myanmar Business Today.

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Chiridacha Phungsunthorn, a partner at LS Horizon and also partner and director at Twin Pine.

“We have the same aspiration and the same philosophy. Twin Pine is a boutique firm and it operates in a flexible and dynamic manner with a focus on Greater Mekong – Myanmar, Laos, Cambodia and Thailand, and LS Horizon also shares the same focus,” Adisorn said.

The Laotian government used to raise funds from various sources such as borrowing from overseas banks or international organisations and issuing kip-denominated bonds. Twin Pine analysed Laos’ borrowing capabilities and found that Laos could diversify its borrowing to keep financing costs low and less dependent on traditional sources.

“We advised the Laos government to step forward from government to government (G2G) lending, and help took them to the international level by putting them in a cross-border capital market in Thailand, which has plenty of resources and funds. We said why not raise the capital in the Thai market, which would also alleviate Laos’ level and integrate it into the ASEAN community,” he said.

Many factors helped the launch of the Laos bond, Adisorn said. Part of the Laos government revenue is in baht as it sells electricity to Thailand. With a matching debt and income, eliminating currency risk from fluctuating exchange rates became easier.

Adisorn said Twin Pine’s philosophy is to meet the top level executives of an organisation including chief executives, directors, chief financial officers, owners and chief investment officers. “These are the people who make decisions. Sometimes these companies see that the resource in the organisation is not ready to response to a specific need. We act as a bridge to help generate ideas and execute top management’s wishes when gaps exist in expertise or readiness and resources. We say, ‘We are here and we can get it done,’”

The advisory firm is also currently raising funds for a real estate project in Yangon. “We have been in talks with land owners in Yangon to build a hospitality and serviced-apartment project. We will help them raise over $20 million from outside Myanmar. This won’t be a listing, only a private placement with high-networth individuals.”

Despite some obstacles like proper land valuation, Adisorn thinks Twin Pine would be able to raise the funds pretty soon. “The prospect is very good and we have to highlight this to the investors. I think we can do it for them by the end of this year; if I’m optimistic then I’d say in three months, Adisorn said. Twin Pine has already studied the foreign investment law in Myanmar and LS horizon will assist in forming an ‘Investment Vehicle’, he added.

“The ROI could be about four and a half years after construction period and now we are looking for some investors who will just put in $20 million. It’s all about finding the people who has the appetite for this kind of market.”

Adisorn believes there’s a big opportunity for Myanmar conglomerates to reach out to international investors and raise funds. “Myanmar is now the darling for new investments. We have already identified a few large corporations and we aim to work with those to raise funds in a similar fashion [like Laos] in the Thai capital market. These customers range from state enterprises, banks, large holdings companies to airlines.

“Our next step is to work with a rating agency in Thailand to do the rating for our clients. If we can get large Myanmar corporations, we can approach the rating agency in Thailand to do the rating and the pricing can be done according to the market demand and supply.”

Starting the discussion is the first step but making it happen is not easy, Adisorn said, adding that the Laos deal took two years to realise. “Now I can say that we have been successful in a virgin market and we are ready to move on to the next level. We are looking at more deals in Laos, new deals in Myanmar and Cambodia. We are likely to see some deals in those countries by the end of this year.”9

However, there’s no surefire way to raise capital, Chiridacha said. “It’s about strategy and how you want to perform according to the market. However, by listing you give away your share of the company. But through bonds you can just raise the capital.”

Adisorn added: “You have everybody believing in Myanmar, so why give away your equity and ownership if there is no synergy. I think you can get cheaper finance through bonds.

“Equity is expensive, unless there is a strategic value. If you know your company is growing and in three years time it’s going to be double or triple in value, why would you give that away? You should keep that as long as you can and if you can find someone to lend your money you should rather borrow the money. Myanmar companies have very strong growth prospects and Myanmar is just starting. So, to sell off equity, without real added value would not be advisable now”

The veteran financial advisor said there are no hidden dangers for Myanmar companies while raising capital from bond markets. “The only danger is for the ones who will buy the bonds if the Myanmar companies don’t perform. So, it’s completely safe,” he said.

From its experience in greenfield markets in Southeast Asia Twin Pine sees Myanmar companies have huge potential to raise capitals from the Thai bond market. “Myanmar is like a rough diamond now. We can see potential companies and we just have to market them.”

Adisorn thinks Myanmar companies should aim to raise capital from Thailand as there are shared values and greater understanding between the two countries.

“Myanmar companies shouldn’t go to New York or London first, because they are not as recognised there. We also don’t think we need to wait for outsiders to come in. We are capable enough and we have regional knowledge plus the cultural background. It’s not a disadvantage for us to be a regional firm, it’s an advantage. We can tell from our experience, ‘In 15 years I know where you [Myanmar] will be.’”

He added: “We go to places in Myanmar and we explain financial instruments like bond or stocks to top officials because they haven’t been exposed to it yet. But people from leading Investment Bank, for example, may not do this for you. At the end of the day, some of these Western establishments will have to learn from us.”

Adisorn claimed what Twin Pine is doing hasn’t been done before. “We matchmake, we give simple and interesting advice. If we present a scenario to someone they would say, ‘I know what you are talking about.’”

“We would like to establish a circle of trust here. We believe in our nations, be it Laos or Myanmar or any nation in Southeast Asia. If we help each other grow, we will see exponential benefits.”


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