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Thailand's BAY to issue subordinated debenture

Bank of Ayudhya will issue a 10-year unsecured subordinated debenture worth Bt20 billion to support long-term funding and reinforce its Tier 2 capital.

"Several banks have issued debentures this year because the cost of funding from sub-debt next year will be higher because of Basel III. We therefore decided to issue the sub-debt before Basel III is effective," said Kris Chantanotoke, executive vice president of Bank of Ayudhya.

He noted that the debenture issue was expected to be less interesting because Basel III, which will be implemented on January 1, requires sub-debt, which is part of Tier 2 or supplementary capital, not to offer redemption incentives or issue step-ups to buyers.

Kris said sub-debt was a fund mobilisation tool apart from deposits, which help support the bank loans and business expansion in the medium to long term.

"Several banks have issued debentures this year because the cost of funding from sub-debt next year will be higher because of Basel III. We therefore decided to issue the sub-debt before Basel III is effective," he added.

The 10-year sub-debt issue is offering a coupon rate of 4.65 per cent per annum to |general and institutional investors from October 29 to November 6 through BAY branches nationwide.

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