Fri, Aug 04, 2006 - Page 11 News List

Taiwan Ratings predicts slight rise in debt issues

PRIMARY MARKET The ratings agency said that banks issued about NT$60 billion in debentures in the first five months partly because of capitalization pressure

By Jackie Lin  /  STAFF REPORTER

The nation's debenture market is expected to regain momentum this year after a subdued performance last year, according to a report issued yesterday by Taiwan Ratings Corp (中華信評), a local arm of Standard & Poor's Ratings Services.

Financial institutions, particularly banks, were slightly more active in the primary market in the first half of the year.

In the five months ending May 31, banks issued about NT$60 billion (US$1.8 billion) in debentures, largely driven by capitalization pressure to support expansion plans, replenish depleted resources from a spike in consumer credit costs, or prepare for Basel II requirements, the report said.

Last year, Chinatrust Commercial Bank (中國信託商銀) and Cathay United Bank (國泰世華銀行) accounted for more than 40 percent of the total new issues.

During the first six months of the year, the market saw a greater number of issuers with Taiwan Cooperative Bank (合作金庫銀行) being the most active among over 10 banks. Its debt issues accounted for about 30 percent of the total amount during the period.

Financial holding companies were also active in the debt market in the past 18 months, mainly to support the growth of subsidiaries or to finance merger and acquisition activities.

Taishin Financial Holding Co (台新金控) was the most significant issuer among financial services providers last year. The firm issued various fixed income instruments, including subordinated bonds and preferred shares, primarily to fund its purchase of Chang Hwa Commercial Bank (彰化銀行).

The most heavily involved financial holding firms during the first half were E.Sun Financial Holding Co (玉山金控) and Hua Nan Financial Holdings Co (華南金控).

E.Sun Financial issued a US$400 million euro convertible bond to raise long-term funds. Hua Nan Financial's subordinated bond issue was for capitalization purposes.

Looking ahead, the ratings firm expected the fixed income market to remain a favored means for raising funds as long as interest rates and demand remain relatively stable.

Because of capital and expansion needs, the value of total issues this year is expected to rebound slightly from the subdued figure of less than NT$150 billion recorded last year, the report concluded.

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