True Corp, Thailand’s largest mobile phone operator, is set to secure its inaugural yen-denominated sustainability-linked loan, aiming to reduce financing expenses amidst elevated dollar interest rates, sources familiar with the matter revealed.
The ¥109.9 billion (approximately 25.3 billion baht or $685 million) loan will serve as partial refinancing for a pricier $2.3-billion bridge facility arranged in September, primarily utilized to support the merger of True and Total Access Communication (DTAC), the sources noted on condition of anonymity due to the sensitivity of the information.
This new three-year loan carries an interest margin of 85 basis points over the Tokyo Overnight Average Rate (Tona), significantly lower than the earlier financing’s initial margin of 130 basis points over the Secured Overnight Financing Rate (SOFR), which could escalate to 200 basis points in its final months.
True’s latest financial move marks the first sustainability-linked loan denominated in yen by a Southeast Asian entity this year. Such loans tie borrowing costs to achieving predefined environmental or social objectives, reflecting a growing trend among regional borrowers to access more cost-effective funding avenues. In 2023 alone, Southeast Asia saw a notable increase in yen-denominated loans, totaling approximately ¥338 billion, up from ¥239 billion in 2022, according to Bloomberg data.
While the Bank of Japan has started normalization measures by lifting its benchmark interest rate from negative territory to a range of zero to 0.1% in March, the impact has been overshadowed by the US Federal Reserve’s aggressive rate hikes. Fed policymakers recently indicated a plan for only one rate cut in 2024, implying a prolonged period of high dollar borrowing costs.
In addition to the yen-denominated loan, True recently raised 15 billion baht through a bond offering in May for debt refinancing and operational expansion. The earlier $2.3-billion bridge financing, a significant syndicated loan from Thailand in 2023, also included an 8.5 billion baht portion, sources added.
By strategically opting for a yen-denominated sustainability-linked loan, True Corp aims to optimize its financial strategy amid challenging global interest rate dynamics, positioning itself for sustainable growth while managing its cost of capital effectively.
