The Government of Thailand last week completed the first deal from its THB24 billion ($582.5 million) securitization program, established to finance construction of a huge office complex on the outskirts of the capital.

Bangkok Bank, Government Savings Bank, HSBC and Thai Military Bank acted as joint leads for the offering - issued out of the DAD SPV - which was upsized from THB9.5 billion to THB10.3 billion due to high demand. Two further issues from the facility are expected early next year and in 2007.

The transaction is backed by 30-year lease and fee payments received by Dhanarak Asset Development Co. from the Thai Treasury for managing the project, completion of which is scheduled for July 2007. All four tranches, with maturities of seven, 10, 15 and 20 years, were assigned a local rating of AAA' by Fitch Ratings.

The two shorter-dated tranches were sold exclusively to retail investors. Demand was strong, with both series fully subscribed on the first day of the offering. A consequence of healthy appetite was tighter pricing than anticipated. The THB1.5-billion seven-year paper came in from 6.8% to 6.7%, while the THB2 billion 10-year notes saw similar tightening to finish at 7.35%. Both offer significant gains on government bonds with similar tenors; respectively trading at 5.90% and 6.05% at press time.

Interest in the institutional tranches was similarly strong. The THB1.8 billion of 15-year paper, offered in the 7.40%-7.80% range, closed at 7.50%, while the THB5 billion twenty-year tranche, offered at 7.75%-8.05%, priced at 7.99%. That presented a 110 basis point spread over Treasurys for the 15-year piece, while the twenty-year piece has no government equivalent.

Many observers hope the deal will be the first of many by the Thai government. In an effort to boost economic growth, the government announced earlier this year its intention to spend THB1.8 trillion ($43.6 billion) on infrastructure projects between now and 2009. A banker involved on the office transaction suggested ABS could be an important component of state funding strategy going forward.

"As the first of the mega projects sponsored by the Thai government, this transaction establishes a successful benchmark and model for the financing of subsequent state projects in the capital markets," he said.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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