The successful issuance and listing of the RB Patel Group’s (SPX:RBG) Wholesale Corporate Bond on the South Pacific Stock Exchange (SPX) Over-The-Counter platform “is a strong signal to the market that there is both issuer readiness and investor appetite for structured fixed income instruments,” said SPX board chairman Nitin Gandhi.
“It reinforces SPX’s strategy of broadening the range of capital raising avenues and investment products available on our market and supporting long term capital formation.”
Speaking at the bell ringing ceremony of the listing last week, Mr Gandhi put out an open invitation to both listed and unlisted companies to consider exploring this new and upcoming capital raising option.
“To the board and management of RB Patel Group, SPX commends you for choosing to raise funds on the listed corporate debt market,” Mr Gandhi said.
“This decision reflects the leadership and confidence in Fiji’s capital markets and contributes meaningfully to their depth and maturity.
“By diversifying your sources of debt funding and accessing longer term capital through a listed corporate bond, RB Patel Group has strengthened its financial flexibility and funding resilience.
“In doing so, the Group has set an important example for other corporates to consider market-based funding solutions as part of a balanced and forward-looking capital strategy.
“As we celebrate this milestone, I wish to emphasise that the corporate bond market presents a valuable opportunity for other corporates, both listed and unlisted, to diversify their funding.”
The RBG $20million corporate bond offer opened in October last year and closed oversubscribed by $1million in early December, the second corporate bond issuance under the new Companies (Wholesale Corporate Bonds) Regulations 2021.
Observers typically gauge investor appetite through that type of response.
The new law limits the minimum investment to $200,000 and the categories of “eligible investors” are listed in the Regulations.
RBG’s offer, according to SPX’s market announcement on it when it closed, “attracted participation from 25 eligible investors across both institutional and individual segments”, a reflection of “growing engagement with corporate debt instruments and their role in portfolio diversification.
The first corporate bond issuance under the new law was by Fijian Holdings Ltd, who went to market in 2022 with a $30m offer.
That exercise attracted eight investors, according to SPX, meaning that the pick-up in the numbers reflected a “widening level of participation in fixed income offerings as the corporate bond market continues to evolve.”
Added to that, it is a tax-free investment.
“The interest you get is all yours. So, if it’s 3.15per cent, it’s 3.15per cent,” RBG chief operating officer Deepak Rathod told this newspaper when the offer was launched last year.
“Generally speaking, you will pay 20 per cent if it’s taxed, so if you have $200,000 lying around, you’re probably on the 20 per cent mark anyway, so you’re probably paying 20per cent tax on that, so your return will be 20per cent less.
“For companies it will be 25per cent less.
“So it’s a good advantage for money that is sitting around and can be used to buy bond for the periods that we have, depending on what you can allow for.”
The corporates – both listed and unlisted – are encouraged to consider the SPX debt market as complementary to bank financing and equity markets, one that offers greater flexibility.
“Similar to the FHL Corporate bond issue, I am pleased to note that the RB Patel Group Corporate bond issue was oversubscribed,” RBF Governor Ariff Ali said in his speech at last week’s listing event.
“Given its strong balance sheet and financial performance, I am sure that it would have easily go a loan from one of the commercial banks at a very competitive interest rate.
“Some of you may question why then the RB Patel Group raised funds through the issuance of corporate bonds.
“I am sure they have a number of valid reasons, and I am happy to share my views over coffee, but let me say one thing, interest rates are at historical lows right now.
“And for those of you who have worked in capital markets will know that when interest rates are low, you try and borrow long term at low interest rates today.
“So particularly the five and the seven year bond rates, the interest rates or the coupon rates that you have, it sticks. If market interest rates will go up, the interest rates on the bond will come down.
“In the short term, we are still very accommodative in our monetary policy, but in the medium to long term, given interest rates are low, the interest rates will only track up but by fixing the five and seven years bond rates now, it means that if market interest rates do go up, your coupon rates will still remain, so that’s the reason of whether you borrow from the bank or from the market.
“The other of course is when you borrow for capital projects. In the first few years, you don’t have the cashflow, so what you want to do is not put too much pressure on debt servicing and therefore, what you really want to do is just pay the coupon and down the line, when your business starts flourishing, you pay off the rest of the debt.
“In my view, a strong corporate bond market is not a substitute for banks; it actually complements it,” Mr Ali said.
“It expands choice, improves resilience and supports sustainable economic growth and I congratulate RB Patel Group of successfully raising their corporate bond and listing it on the SPX.”
