Ayala gets top marks for $400-M perpetual notes

A landmark $400-million fixed-rate perpetual bond issued by the country’s oldest business house Ayala Corp. has bagged the “Philippine capital market deal for 2017” citation from Thomson Reuters’ International Financing Review Asia (IFR Asia).

IFR Asia, a leading source of fixed income, capital markets and investment banking news and commentary, cited in its 2017 review how the Ayala deal had drawn strong demand from both offshore investors and domestic institutions awash with dollar liquidity.

The perpetual bond deal was oversubscribed, with final orders breaching $2.5 billion.

The issuance had set a precedent in the Philippines for this type of bond. The $400-million senior notes issued by Ayala Corp. in September was likewise the first fixed-for-life corporate debt deal out of Southeast Asia.

The perpetual notes, issued by wholly owned unit AYC Finance Ltd. and guaranteed by the 183-year-old conglomerate, carried an annual coupon of 5.125 percent.

A fixed-for-life perpetual issuance means the rate never changes—there is no resetting or step-up provision that could increase the cost of borrowing. This is in contrast with other perpetual bonds that change rates, thus encouraging the issuer to redeem.

The IFR report said the perpetual notes, Ayala’s first offshore issue since 2003, attracted strong demand from investors looking for quality Philippine exposure. The publication also cited how Ayala had responded by upsizing the issue and accelerating launch of the deal in the middle of its investor road show.

Aside from allowing the firm to refinance maturing US dollar obligations and to fund investments, the deal would enable it to pursue new opportunities, expansions and acquisitions. —DORIS DUMLAO-ABADILLA