ICTSI repurchases $345M of outstanding securities

Global port operator International Container Terminal Services Inc. (ICTSI) successfully repurchased $345.5 million of its outstanding perpetual securities through a tender offer funded by the issuance of new senior perpetual securities worth $375 million.

The liability management exercise allowed ICTSI to further strengthen its capital structure while realizing significant cost savings.

Last October 13, ICTSI and issuer Royal Capital BV announced the results of the Royal Capital’s offer of its 6.25 percent senior perpetual capital securities that will mature in 2019 and 5.5 percent senior perpetual capital securities to mature in 2021 which were both guaranteed by ICTSI to convert old perpetual securities for cash.

An aggregate nominal principal amount of $345.45 million in old perpetual securities was submitted in the tender offer, of which $160.31 million comprised tenders of securities maturing in 2019 and $185.14 million from tenders of securities maturing in 2021.

Royal Capital offered a price of $1,067.50 per $1,000 in principal amount of the 2019 securities and $1,057.50 per $1,000 in principal amount of the 2021 securities. In addition, last October 13, it successfully priced a $375 million offering of senior perpetual capital securities, guaranteed by ICTSI.

The New Perpetual Securities were structured to constitute equity under International Financial Reporting Standards and represent ICTSI’s third successful issuance in this format.

The New Perpetual Securities confer a right to receive distributions at a rate of 4.875 percent per annum and were priced at 99.225 percent.

The New Perpetual Securities shall rank pari passu with all other outstanding unsubordinated obligations of the issuer, who will have the right to redeem the New Perpetual Securities on May 5, 2024 and any semi-annual distribution payment date thereafter.

The rate of distribution for the New Perpetual Securities will be reset every five years from May 5, 2024 and will increase by 2.5 percent per annum on that day, in each case if the New Perpetual Securities were not already redeemed by the issuer.

Consistent with the requirements for equity under IFRS, the Issuer may resolve, at its discretion, to defer payment of distribution otherwise payable on a distribution payment date.

The New Perpetual Securities were widely distributed with fund managers accounting for 46 prercent, private banks for 30 percent, and banks for 24 percent. By geography, Asia took up 82 percent with Europe at 18 percent.

The transaction is significant in several respects.

The tender offer is the first such transaction targeting repurchase of U.S. dollar perpetual securities in Asia this year. Meanwhile, the New Perpetual Securities achieved the longest non-call date for any Asian corporate hybrid security to date. ICTSI remains the only Philippine issuer to have offered U.S. dollar senior perpetual securities in the international debt capital markets.

Moreover, the New Perpetual Securities set a record-low U.S. dollar distribution rate for a Philippine corporate perpetual security, a significant reduction relative to the 2019 Securities and the 2021 Securities.

“This capital management exercise is strategic and value accretive in many respects. The two most important of which are the extension of the call duration on almost half of ICTSI’s outstanding senior perpetual securities, and securing guaranteed annual cost savings from the lower distribution rate.

We are pleased to have achieved these objectives particularly given the volatile market backdrop,” ICTSI Senior Vice President and Chief Financial and Compliance Officer Rafael Consing said.

Citigroup Global Markets Limited, The Hongkong and Shanghai Banking Corp Ltd and Standard Chartered Bank acted as joint lead managers and joint bookrunners for the New Perpetual Securities issuance and as dealer managers for the tender offer.

ICTSI operates a total of 30 common user container terminals located in 20 countries, with a focus on facilities having total annual throughputs ranging from 50,000 to 2,500,000 twenty-foot equivalent units (TEUs).