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SMC to launch new P20B bond offer

/ 04:00 PM December 14, 2016

Conglomerate San Miguel Corp. is raising up to P20 billion from a fresh offering of retail bonds, proceeds from which will be used to retire ahead of maturity some US dollar-denominated debt.

The proposed bond issuance has obtained a “PRS Aaa” rating with a “stable” outlook from Philippine Rating Services Corp. (Philratings), the highest rating in the scale of this local credit rating watchdog.

Securities rated “PRS Aaa” are deemed of the highest quality with minimal credit risk. The borrower’s capacity to meet its financial commitment on the obligation is deemed “extremely strong.”

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The bonds are part of San Miguel’s three-year shelf registration of up to P60 billion.

The base offer is P15 billion but SMC has the option to upsize by another P5 billion to cover excess demand.

Shelf registration allows an issuer like SMC to register and sell under the same prospectus and other regulatory filing requirements a certain volume of securities that the issuer does not intend to use up right away.  

The Securities and Exchange Commission (SEC) gives the issuer with securities under shelf registration a three-year window to use up its leeway. This allows the issuer to complete all the tedious paperwork and thereby lay the groundwork for a future issuance and immediately go to market as soon as conditions are favorable.

For its part, Philratings said the triple-A rating was assigned to SMC’s proposed offering given the following key considerations:
-ample cash flow generation that is seen to strengthen further as the company’s energy and infrastructure projects are completed;
-manageable and improving debt position, especially considering the capital-intensive nature of its recent projects in energy and infrastructure;
-adequate liquidity and financial flexibility;
-solid market position and substantial track record of its subsidiaries, backed by stable demand and boosted by an improving economy; and,
– seasoned management team with sound strategies and use of proceeds.

SMC is one of the largest conglomerates in the Philippines with diversified businesses ranging from beverages, food, packaging, fuel and oil, energy and infrastructure. Its subsidiaries either enjoy a dominant or strong and leading market position.

The companies under SMC include: San Miguel Brewery Inc., the largest beer producer in the country; Ginebra San Miguel Inc., reportedly the world’s largest producer of gin by volume; San Miguel Pure Foods Company Inc., offering some of the country’s most recognizable brands including Magnolia, Purefoods, Monterey, Dari Crème and B-Meg; San Miguel Yamamura Packaging Corp. and its subsidiaries; Petron Corp., the largest integrated oil refining and marketing company in the Philippines and a major player in Malaysia;. SMC Global Power Holdings Corp., which accounts for 22 percent and 17 percent of the Luzon and national grids, respectively; and San Miguel Holdings Corp., operator and developer of key infrastructure projects.

“SMC’s management team is well accustomed to the Philippine operating environment, having managed the company through periods of crisis and instability in the Philippines. Most senior managers have been with the company for a considerable amount of time,” Philratings said.

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“SMC continues to invest in businesses that have the potential to be leaders in their respective industries. SMC also seeks to diversify into industries that support and ride on the growth and development of the Philippine economy, hence its recent foray into fuel and oil, energy and infrastructure. In addition, SMC consciously identifies and pursues synergies across its different businesses,” it added.

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TAGS: bond offering, Philratings, San Miguel, SMC
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