From now until December, companies with assets of less than 2 billion baht will be offered reduced listings, ratings and issue fees as an incentive to draw small firms to diversify their capital structure and issue debentures.
Vorapol Socatiyanurak, secretary-general of the Securities and Exchange Commission (SEC), said about 3 million non-listed companies and 200 listed companies currently have difficulty accessing the bond market.
Factors that discourage companies from raising funds through debt issuance include high funding costs due to liquidity and credit risk concerns by investors, low credit ratings and below-standard accounting practices that affect the ability of firms to enter the market.
The SEC, in cooperation with eight other agencies and associations, hopes the new promotions will help to give small companies new opportunities to enter the market.
The other agencies are the Thai Bond Market Association (TBMA), Tris Rating, Fitch Ratings, the Bond Electronic Exchange, the Thai Listed Companies Association, the MAI Listed Companies Association, the Federation of Thai Industries and the Thai Chamber of Commerce.
The TBMA pledged to reduce its registrar and annual fees by up to half for participating companies, while the SEC will reduce issuance fees and fast-track applications.
Tris Rating will also cut ratings fees on a case-by-case basis.
Applicants must register for the programme by year-end, although issues may take place next year.
"In the past, SMEs were unable to access the bond market due to cost and a number of other obstacles," said Dr Vorapol.
"Now they'll have an opportunity to build up a track record in the bond market, helping their credit and image as well as better balancing their debt structure away from bank loans."
Dr Vorapol said the SEC is finalising rules on high-yield debt or "junk bonds" _ debt with ratings below BBB-.
Mutual funds currently may invest up to 15% of their total assets in high-yield debt, with a limit of no more than 5% of total assets invested per issue.
In the future, designated high-yield bond funds will be allowed to invest up to 100% of assets in high-yield debt, with a per-issue limit of up to 25% of assets.
Santi Kiranand, the chairman and president of Tris Rating, said raising debt through the bond market can clearly support long-term growth for a company, particularly in times of economic downturns when bank lending becomes scarce.
"In the past, many small companies collapsed as banks called back loans during economic crises. But bonds can help the problem, and there is no shareholder dilution effect such as when issuing new stock," he said.
TBMA president Niwat Kanjanaphoomin said corporate debt issues have risen sharply over the past decade.
Currently, 1.8 trillion baht worth of long-term corporate debentures are outstanding in the market, with another 300-400 billion outstanding in short-term debt.
The total is equivalent to 80% of the country's gross domestic product, up from just 10% of GDP in 1997.
Two companies, both listed on the Market for Alternative Investment, have expressed interest in the bond-issue programme.
Interlink Communication tentatively hopes to raise 700-800 million baht in funds, while OfficeMate Plc plans to float debt raising the same amount.