Thai $2.96b rice bond may struggle, risk of further payment delays

Thai $2.96b rice bond may struggle, risk of further payment delays
File picture shows a vendor weighing a bag of rice at a market in central Bangkok

BANGKOK - Thailand may struggle to sell a 75 billion baht (S$2.96 billion) bond to fund its rice intervention scheme, fund managers said on Monday, risking further delays on payments to farmers.

The state Bank of Agriculture and Agricultural Cooperatives (BAAC) needs money from the bond, its biggest ever, to pay farmers for rice bought at above market prices in a subsidy scheme that has cost the government 680 billion baht so far.

Farmers, a key support group for the government of Prime Minister Yingluck Shinawatra, have threatened to join growing anti-government protests as they have not been paid for their rice since the scheme was renewed in October.

Underwriters began sounding out institutional investors on Friday and will set the price on Monday when book-building ends. The bond will be issued on Nov. 29.

"The bond is really big and I think it may not be sold out,"said Chajchai Sarit-apirak, first senior vice president at Kasikorn Asset Management, which holds BAAC bonds.

"If the government wants to sell it all, they have to offer a high spread." Thailand's finance ministry said last week it would borrow from banks or allow them to bid on the unsold portion if institutional interest fell short.

BAAC, which funds the rice scheme, has sold about 123 billion baht ($3.9 billion) of debt this year but had to cancel three auctions last month. BAAC officials were not immediately available to comment.

The latest bond, a three-year note guaranteed by the government, will be used to pay for the main harvest while a second smaller issue will be needed for the subsequent crop.

"I've talked to other fund managers and they also think although the bond is guaranteed by the government, they don't want to support the rice buying scheme because it's not transparent," said a bond dealer at a domestic bank.

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