LOLC (Cambodia) Plc., a leading microfinance deposit-taking institution in the Kingdom, plans to raise $20 million by issuing corporate bonds on the Cambodia Securities Exchange (CSX).
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LOLC will be only the second institution to issue corporate bonds in Cambodia, following in the footsteps of Hattha Kaksekar Limited (HKL), another microfinance institution (MFI) that issued Cambodia’s first corporate bond last year.
LOLC obtained approval for the issuance from the National Bank of Cambodia (NBC) on Feb 25, according to a press release issued by the MFI.
The bonds will have a tenor of 3 years. The final coupon rate of the bonds will be determined before the subscription period, LOLC said.
The bonds are expected to be issued late March or early April.
“We are very glad to have obtained approval from NBC for our first bond issuance,” said Sok Voeun, LOLC’s CEO, in the release.
“We will introduce a new product in the market – FX-indexed bonds.
“Diversifying our sources of funding, particularly the long-term funding will ensure the bank’s future growth as well as improve its financial position,” he said.
“LOLC’s upcoming bond issuance is unique. Unlike previous corporate bonds, LOLC offers investors not only fixed-coupon bonds but also FX-indexed bonds,” he said, explaining that FX-indexed bonds are “typically designed to provide investors with an embedded tool to hedge the future exchange risk.”
He said both fixed-coupon and FX-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 riel. The payments of interests and principal will also be made in riel, he added.
Han Kyung Tae, managing director of Yuanta Securities, the bank’s advisor and underwriter for the bond project, explained the features of FX-indexed bonds.
“FX-indexed bonds, as well as inflation-indexed ones, were very common in Latin America and greatly contributed to the region’s bond market development from the late the 1980s until the early 2000s.
“During this period, they were almost exclusively the only bonds issued by governments and corporations.
“We believe the FX-indexed bond is a particularly useful product for Cambodia in this transitional period in which the market seeks to achieve two goals – the promotion of the riel and attracting investors to the local capital market,” he said.