SEC enhances high-yield bond oversight amid Thai market instabilities

The Securities and Exchange Commission (SEC) is enhancing oversight measures for high-yield bonds to fortify payment protections and investor assurance, according to remarks made by SEC Secretary-General Pornanong Budsaratragoon. This move comes in response to recent market instabilities caused by numerous defaults and a significant accounting scandal in the speculative debt sector.

As part of this heightened vigilance, the SEC has taken a proactive approach to communicating with companies upon the release of news or information that could potentially impact the servicing of high-yield debts. This is a shift from the regulator’s previous stance, which was less involved and primarily involved reaching out to bond issuers approximately three months before their note expiry dates, as the secretary-general noted.

The appeal of high-yield debts in Thailand has been on a decline following a series of payment delays and corporate scandals, including one linked to Stark. Consequently, investors called for increased market supervision and monitoring. The Finance Ministry reassured earlier this month that Thai financial authorities are ready to implement appropriate measures to manage distressed fixed-income debts.

We are trying to avoid further unexpected developments that could catch us off guard, stated Pornanong from her office. By increasing our monitoring efforts, we hope to obtain more early warning signs from companies facing payment difficulties.

The Thai Bond Market Association projected a potential drop in Thailand’s corporate bond sales for a second consecutive year, partially owing to rising default concerns. After witnessing a series of missed payments, investors have adopted a more cautious approach towards bond sales from high-risk companies.

Italian-Thai Development recently received bondholders’ approval to extend the maturity dates of most of its outstanding bonds by another two years amidst a liquidity crisis. However, the engineering firm had to call for another meeting as one tranche failed to secure a quorum.

Miss Universe

In November, JKN Global Group, a media company and owner of the Miss Universe beauty pageant brand, approached a court for debt restructuring, just two months after announcing it could not fully honour its bond repayments.

The SEC is planning to focus additional attention on the bonds of companies with no credit ratings or low grades by demanding increased disclosure of financial data such as cash flows and other ratios. These new requirements are anticipated to be enforced within the coming months.

The high-yield corporate bond sales downturn was a significant factor in the 19% drop in total domestic debt sales in 2023, as per the Thai Bond Market Association’s data. Last year, businesses with junk ratings or no credit assessments sold bonds worth 92 billion baht, marking a 29% decrease from the record 130 billion baht in 2022, reported Bangkok Post.