B/E issuers tread carefully

After a flurry of non-rated bills of exchange (B/E), issuers are shifting to short-term bonds, asset-backed B/Es and loans from financial institutions, as these debt instruments are better suited to funding purposes.

“Even though B/E issuances continue, most filings are changing to issue B/Es backed by collateral assets, bank loans or short-term debentures,” said Rapee Sucharitakul, secretary general of the Securities and Exchange Commission.

Four SET-listed companies and one MAI-listed firm have failed to redeem B/ Es on their assigned dates since last October: Nation Multimedia Group Plc (NMG), KC Property Plc, Inter Far East Energy Corporation Plc (IFEC), E For L Aim Plc (EFORL) and Rich Asia Corporation Plc.

NMG has already serviced 50 million baht in debt from B/Es to Asset Plus Fund Management, while EFORL paid 200 million baht and IFEC paid the first batch of its 200 million baht in defaulted B/Es, even as another 200 million baht in B/Es went into default two weeks ago. IFEC contends that conflicts between major shareholders caused the B/E defaults.

Even though the defaults resulted from internal difficulties and not the economy, confidence in unrated B/Es has subsided and several stock market participants have warned non-rated B/E issuers to prepare to seek funding from financial institutions or other financial sources in case the debt instrument’s holders refuse to roll over.

Mr Rapee said that the regulator will continue to tighten its requirements regarding information disclosure of B/E issuances and the short-term debt instrument sales of investment consultants (ICs).

“Investors should keep evidence related to investments in funds which splash money into B/Es,” he said. “If ICs conceal information or dishonestly perform duties, they could be subject to the maximum penalty of licence revocation.”