First floating-rate 10-year bond subscribed by domestic insurance companies. First listed infrastructure bond in Cambodia. Rated AAA by the Rating Agency of (Cambodia) Plc
GuarantCo, part of the Private Infrastructure Development Group (PIDG), has provided a USD 24 million guarantee for an innovative dual tranche bond issued by Royal Railway Cambodia, split equally between 5 years and 10 years. The features of this bond have the potential to be transformational in facilitating future infrastructure funding through domestic capital markets in the country. The bond investors included Prudential (Cambodia) Life Assurance PLC and Manulife (Cambodia) PLC. SBI Royal Securities, a leading securities firm in Cambodia, acted as the sole mandated lead arranger of the bond.
Proceeds of the bond, which is rated AAA by Rating Agency of (Cambodia) Plc, will be utilised to purchase new trains and finance renewal, and upgrades of the country’s railway network. The financing is expected to increase Royal Railway’s capacity and efficiency to cater for the large unmet demand for freight and public services in Cambodia. Given the underdeveloped road network, Royal Railway’s freight services will ensure seamless, efficient and fast movement of goods across Cambodia.
Royal Railway is the exclusive national railway operator in Cambodia which provides the company with a significant market opportunity in transportation and logistics, allowing it to service exports via major national sea and land trade routes. The company’s strategy aligns with the longer-term Triangular Connectivity strategy of the Government of Cambodia to improve connectivity with neighbouring Laos, Thailand and Vietnam, and facilitate cross-border trade.
The transaction is aligned with Sustainable Development Goal 9.1 and 9.4: Develop sustainable, resilient and inclusive infrastructures and upgrade all industries and infrastructure for sustainability. By enhancing the rail system of Cambodia, the transaction is expected to improve the reliability and efficiency of trade for businesses leading to increased revenues and economic growth. Savings for businesses transporting goods via rail may be as large as 66 percent per km travelled in comparison to moving the same goods via roads. Additionally, businesses may benefit from a reduction in the number of products that are lost due to breakage or spoilage during transportation.
Ultimately, the transaction will allow Royal Railway to unlock rail capacity to support the development of the country’s freight market thereby helping reduce per unit costs. GuarantCo expects the transaction to demonstrate the viability of the rail sector, leading to more industries using the railway and more integrated supply chains which will further enhance the efficiency of the rail network.
Layth Al Falaki, CEO of GuarantCo, said: