Local companies have in the last three years struggled to issue corporate bonds, with the market segment hit hard by the collapse of Chase Bank and Imperial Bank that went down with billions in bondholder funds.
Companies should improve transparency and corporate governance to attract local financing and replace the capital lost through foreign investor flight to the US, a senior Bretton Woods official has said.
Local companies have in the last three years struggled to issue corporate bonds, with the market segment hit hard by the collapse of Chase Bank and Imperial Bank that went down with billions in bondholder funds.
Frederic Wandey, head of treasury and syndications coordination unit at the International Finance Corporation (IFC), says the State can also boost private sector access to capital by enhancing capital markets integration to allow firms seek debt beyond the borders.
The IFC is the World Bank’s private sector investment arm, which also offers advisory services to help companies access capital.
“You need to build the domestic ecosystem which can balance out the outflow of international investors, by providing as much information as possible to the investing community to make them comfortable with the market and to know what it takes to come in and exit from the investments,” Mr Wandey told Business Daily on Friday.
“We must also work to harmonise the regulatory framework and financial infrastructure in the region to make it possible for an issuer to access a wider catchment area. It will deepen the markets on both the demand and supply side.”
He added that in Asia, where several markets suffered foreign investor flight in the past, the regulators worked hard to improve corporate governance, which makes companies more credit worthy, and set up credit guarantee funds to support the quality of issuers.
Locally, the corporate bond segment remains largely underutilised by firms seeking capital, with investors reacting to the lack of transparency in companies by demanding steep premiums on interest when lending to them.
In their most recent market soundness report, the Capital Markets Authority (CMA) said the resolution of the issues of insolvency especially for bonds that have not been listed would go a long way in instilling confidence in corporate bond markets.
Some analysts have called for companies to be rated before issuing bonds.
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