KBank, Central Group close deal on THOR-based credit facility and cross-currency derivative transaction - the first for Thailand

Friday 02 April 2021 09:28
KASIKORNBANK (KBank) and Central Group have successfully arranged a credit facility with the use of Thai Overnight Repurchase Rate (THOR) as a reference rate, amounting to more than 650 million Baht, together with THOR-based cross-currency derivative transaction. The first transaction of its kind in Thailand, this financial innovation will ensure efficient risk and cost management for Central Group. KBank is gearing up to promote the THOR benchmark rate in line with the Bank of Thailand's guidelines for the benefit of customers in conducting financial transactions.
KBank, Central Group close deal on THOR-based credit facility and cross-currency derivative transaction - the first for Thailand

Mr. Patchara Samalapa, KBank President, said that KBank and Central Group have signed a financial accommodation agreement to offer THOR-based credit facility in the amount of more than 650 million Baht together with cross-currency interest swap with floor, using THOR as a reference rate, in order to convert Central Group's Baht-denominated debt with THOR interest rate into EUR-denominated debt in accordance with the retail conglomerate's liability management policy. Central Group is KBank's first client to use such financial arrangements after the Bank of Thailand announced the adoption of THOR as the new benchmark rate in April 2020.

This accomplishment can be attributed to KBank's success in the issuance of Thailand's first-ever THOR-based derivatives and debentures during 2020. KBank is fully committed to the development of the THOR-based interest market which helps enhanced corporate clients in risk and cost management alternatives, as it allows them to gain access to foreign currency-denominated funding sources and fixed-rate loans via THOR-based derivative transactions.

The completion of such transactions is one of KBank's successful measures in support of the Bank of Thailand (BOT)'s policy to promote the Thai financial market via the development of new financial products to facilitate the phasing out of the London Interbank Offer Rate (LIBOR) and Thai Baht Interest Rate Fixing (THBFIX). Based on the BOT's guidelines, new transactions classified as loans, debt instruments and structured notes (Cash Products) based on THBFIX will be discontinued from July 1, 2021, onwards.

Mr. Prin Chirathivat, Executive Director and Deputy Group CEO of Central Group, said that such transactions can be considered an innovation in lending and the THOR-based derivatives market, as they comprise Thailand's first foreign currency synthetic borrowing through THOR-based derivatives - in alignment with Central Group's guidelines on liability management. Central Group is pleased to be working with KBank to develop the THOR-based interest market in accordance with BOT's guidelines.

Source: Kasikorn Bank