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Splash raising P1.12B to repay debt, fund food expansion

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Personal care products manufacturer Splash Corp. is raising P1.12 billion from the issuance of debt notes to selected institutional investors to boost its diversification into the food business and refinance maturing debts.

In a disclosure to the Philippine Stock Exchange on Friday, Splash said it has signed an agreement on a corporate notes facility with Security Bank Corp., Robinsons Bank and Security Bank Corp. trust division. The arranger of the facility is SB Capital Investment Corp.

In an interview, Splash chairman and chief executive Rolando Hortaleza said the corporate notes would have a term of five years.

Unlike retail bonds, which are sold through a public offering and must go through a more tedious registration process, corporate notes are a quicker fund-raising option for top-tier corporations as the debt paper are sold to a maximum of 19 selected institutional investors.

Part of the proceeds would be used by Splash to refinance P600 million in five-year fixed rate notes maturing next year, Hortaleza said. There would be about P500 million in net proceeds from the fund-raising that would be used to expand the company’s foray into the food business in the Philippines and in the United States, he added.

Splash is also beefing up its cash reserves to take advantage of expansion opportunities in Africa, particularly in Nigeria.

The company, which bought an 80-percent stake in the food manufacturing unit of Barrio Fiesta last September, is upbeat on its foray into the food business.

“We’re getting ready to put up a new plant,” Hortaleza said.

By next year, Hortaleza said the company would spend about P500 million for capital outlay, P200 million would go to the renovation and upgrade of its existing plant in Valenzuela and P300 million for advertising and promotions.

He said the plant in Valenzuela would have to be spruced up to temporarily accommodate food manufacturing operations. But eventually, he said Splash was looking at a new property in Bulacan where it would like to consolidate the manufacturing operations of the personal care and food segments. Hortaleza said the firm would invest around P400 million on a new manufacturing plant.

To harness Barrio Fiesta’s good distribution capability in the United States, Hortaleza said Splash would also like to set up a small-scale manufacturing facility there by next year to be able to sell more products.

He explained that the local food manufacturing unit could cover local demand and likewise sell food mixes in the US but noted that there were regulatory barriers to the export of locally processed meat products like “tocino” and “longganisa.”

Barrio Fiesta’s products range from sautéed shrimp paste, ready-to-eat canned meals, white vinegar, fish sauce, soy sauce and lechon sauce to fruit preserves and other condiments. In keeping with its commitment to home-style cooking, Barrio Fiesta products have no preservatives.

Splash acquired the Barrio Fiesta brand (excluding the restaurant chain) to capitalize on its strong brand awareness and existing distribution channel overseas, especially in the US. The company aims to use this acquisition as its platform to become a major player in the food industry.

Meanwhile, Hortaleza said the Splash group was likewise readying funds to foray into Nigeria. As early as 2007, Splash has signed distribution deals in Nigeria and other West African countries.

He said Splash was now looking to acquire a property in Nigeria worth around P150 million that could be the hub of its operations in the populous African country.


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