Friday , 29 March 2024

Globe, SMC target up to P100B in bonds

By Riza Lozada 

The Securities and Exchange Commission’s (SEC) shelf registration program has drawn some of the biggest companies to apply for more than P100 billion in planned bond floats.

Under the shelf registration program, securities may be registered for an offering to be made on a continuous or delayed basis, or in tranches, for a period not exceeding three years.

Capital raising can be done by issuers as they are needed and/or when market conditions are favorable for them.

The SEC approved last Friday a P60-billion fixed rate bond issue of diversified conglomerate San Miguel Corp. (SMC) in which the listed conglomerate will initially issue bonds worth P15 billion with an oversubscription of up to P5 billion.

SMC will use the net proceeds of P14.84 billion to refinance its existing US-dollar denominated obligations and fund expenses related to its operations and activities.

The shelf registration program allows the SMC to issue the remaining P40 billion worth of bonds in the future. BDO Capital & Investment Corp., BPl Capital Corp., China Bank Capital Corp., ING Bank, N.V., Manila Branch, RCBC Capital Corp., SB Capital Investment Corp. and Standard Chartered Bank will serve as the joint lead underwriters and bookrunners.

The SMC bonds will be listed and traded on the Philippine Dealing and Exchange (PDEx). Globe Telecom Inc. also indicated plans for a three-year shelf registration of up to P40 billion in principal amount of debt securities in one or more tranches.

STI Education Services Group Inc. (STI ESG) also registered with the SEC last January 10 for a shelf registration of its fixed rate bonds worth up to P5 billion to be offered in one or several tranches.

The first tranche will be worth up to P3 billion to be issued in two series, with a term of seven and ten years. The net proceeds from the bonds issue will be used to finance STI ESG’s campus expansion projects and for other general corporate requirements.

The SEC said the shelf registration program boosted corporate bonds issuance last year.

“The corporate bond market has shown rapid improvement as corporate bonds registered with SEC in 2016 increased by 134 percent compared to 2015,” SEC noted.

Private companies registered with the SEC around P280 billion in fixed rate and deferred coupon paying bonds and commercial papers. In 2015, P120 billion in debt instruments were registered with SEC. SEC said that out of the P280 billion registered bonds, approximately P143 billion were issued and made available to the investors.

“The significant boost in corporate bond issuance was attributed to the enhanced shelf registration program under the 2015 Securities Regulation Code Implementing Rules and Regulations (2015 SRC-IRR),” SEC reported.

The data showed that out the P280 billion registered bonds and commercial papers, around P236 billion or 84 percent of these debt instruments were registered through the enhanced shelf-registration system Under the shelf registration program, securities may be registered for an offering to be made on a continuous or delayed basis, or in tranches, for a period not exceeding three years.

The SEC also provided flexibility in the payment of registration fees. The fees are now payable per tranche of issuance and proportional to the issued value.

Previous corporate bond issuers were Ayala Land Inc., DMCI Project Developers Inc., Ayala Corp, SM Prime Holdings Inc., Petron Corp, SM Investment Corp., Arthaland Corporation, Double Dragon Properties Inc., and SMC Global Power Holdings Corp. The 2015 SRC-IRR also provided an improved definition of commercial paper.

Commercial paper is now defined as evidence of indebtedness of any person with a maturity of 365 days or less. The new rules ceased using the terms of “long term commercial paper” and “short term commercial paper”.

Selling commercial papers is also made easier with the requirement of an issuer rating instead of a separate rating for each issuance. Commercial paper issuers include Cityland Inc., Cityland Development Corp., City & Land Developers Inc., BDO Leasing and Finance Inc., and SL Agritech Corporation.

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