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Yieh Phui issues Formosa Bond with 5% coupon
Taiwan News, Staff Writer
2014-07-15 02:12 PM

The first Formosa Bond to be simultaneously issued in Taiwan and Singapore has completed pricing and will be issued July 16. This Formosa Bond issued by Yieh Phui Enterprise’s (2023) subsidiary Golden Developments Holdings Ltd. has a three-year maturity, a total face value of RMB 300 million, a coupon rate of 5%, the highest rate among Formosa Bond of equal maturity, and is underwritten by BNP Paribas. Compared to the three year rate of return on China’s capital markets of 7%, this coupon seems like quite the bargain.

Bankers point out that now is a good time to raise RMB capital through the issuance of debt. On the one hand, interest rates can be fixed ahead of global interest rate increases induced by U.S. Federal Reserve rate hikes and, on the other hand, funds raised directly in Taiwan or Hong Kong can incur an interest rate cost less than bank financing.

Yieh Phui indicated, the 5% coupon rate of the company’s Formosa Bond issue is, indeed, higher than Taiwan’s lending interest rate of approximately 2%. However, in addition to considering interest rate differential, the current abundance of RMB capital facilitates financing and an internal assessment of future RMB fluctuations risk has led the company to believe that direct access to RMB for future expenditures at its Changshu plant in China is more conducive to risk management.

The coupon of this Formosa Bond issue is higher than the 4.5% coupon of the three-year Dim Sum Bond (RMB bond) issued by Yieh Phui in Hong Kong in 2012. Securities dealers stated, most Formosa Bond issuers are banks. Banks are beholden to credit rating criteria different from regular companies, resulting in coupon differences. Currently, among issued Formosa Bonds, Uni-President China Holding Company’s three-year bond possesses the highest coupon at 3.60%.

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