Little Laos piling up big debts to China

This week Laos redeemed a US$150 million bond listed on the Singapore Exchange, chipping away only slightly at its ballooning external debt owed over the next five years. The $150 million bond, sold on the international market with a 6.875% interest rate, was the first of three sovereign bonds falling due this year. Two Thai baht denominated bonds worth 5 billion baht ($156 million) will fall due in October and November.

Moody’s and Fitch credit rating agencies both downgraded Laos’ sovereign ratings last year in response to the nominally communist country’s escalating public debt, declining foreign exchange reserves and concerns about potential defaults on debts coming due.

“If you look at their credit history they have never defaulted,” said Adisorn Singhasacha, CEO of Twin Pine Group, a Bangkok-based financial advisory company that has arranged seven sovereign bonds for Laos and corporate bonds for national power producer EDL-Gen since introducing the neighboring country to Thailand’s capital market in 2013.

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