SMIC considers issuing dollar bonds

The country’s leading conglomerate SM Investments Corp. is open to issuing bonds in US dollar denomination next year to complete the P50-billion borrowing program made under a shelf registration program.

SMIC chief finance officer Jose Sio told reporters in a recent interview that after the conglomerate’s issuance of P20 billion worth of bonds, the group would still have leeway to raise about P30 billion next year depending on market conditions.

“It could be peso or dollar,” he said.

Some of the proceeds will be used to fund acquisitions related to core businesses, Sio said.  There are some ongoing discussions for potential acquisitions but they are confidential at this point, he added.

Recently, SMIC completed a P20-billion seven-year bond offering.  The securities were priced to yield 5.1590 percent a year.

This offering is the maiden issue from SMIC’s P50 billion bond shelf registration with the Securities and Exchange Commission, which gives a three-year leeway for an issuer to offer securities using the same prospectus.

But Sio said SMIC could opt to raise the remainder from the offshore bond market notwithstanding the recent upswing of the US dollar against emerging market currencies.

“If interest rate is more or less the same, I’d rather get pesos. But if interest rate differential is big – let’s say 2 percent or 3 percent, then we could go for dollar (issuance),” Sio said.

Although SMIC had incurred some US dollar-denominated debt in recent years, Sio said all of these were fully hedged.  As such, he said SMIC was not worried about the depreciation of the peso against the US dollar, adding that the conglomerate would not have to buy dollars to service such debt.

SMIC is the country’s leading player in retail, banking and property development. Its property arm SM Prime Holdings is among the largest property companies in Southeast Asia in terms of market capitalization.