IFC helps PNG develop corporate debt market

INTERNATIONAL Finance Corporation (IFC), in co-operation with Bank of PNG, the Government and industry representatives is helping PNG develop a corporate debt market.
IFC, a member of the World Bank Group, has been working with a broad group of representatives in PNG.
It has concluded that there was the possibility of creating a functioning, albeit modest, corporate bond market in the country, subject to fixing gaps and issues in the country’s legal and regulatory environment.
In a bid to further promote the creation of a corporate bond market, IFC has invited potential issuers, investors and advisers as well as regulators to a forum in Port Moresby.
“There is a relatively significant number of large investors in Papua New Guinea that are highly liquid, heavily invested in Government bonds and looking for opportunities to diversify their investments,” said IFC’s resident representative for PNG, John Vivian.
“At present, many of these investors are making some investments in direct corporate loans.
“If there was a functioning corporate bond market, these investors would have the opportunity to take only a part of a company’s debt in a standardised and transparent environment, sell it on at a fair price when necessary and invest in a wider range of companies.
“There is equally a potential pool of issuers, who could consider issuances to diversify their sources of funding and attract longer-term fixed priced sources of debt to fund their businesses and to facilitate asset-liability management.”
An initial report prepared by IFC says significant gaps in the regulatory environment would need to be addressed in order to create a functioning corporate bond market.
“The intention of the forum is to walk through those gaps and potential solutions to the legal and regulatory environment,” Vivian said.
“By inviting potential issuers, investors, intermediaries, advisers, and regulators, everyone has the opportunity to reach agreement on a path forward to encourage corporate issuances.” The forum is part of IFC’s capital markets development project, supported by the Australian and New Zealand governments under the Australia-New Zealand -IFC PNG partnership.
The project is focused on developing both the Government bond market infrastructure and creating a corporate bond market.