SMC offers to buy back $600M in convertible bonds

San Miguel Corp. (SMC) has launched a tender offer to buy back $600 million worth of convertible bonds as the aggressively expanding conglomerate tries to trim down debt levels.

In a disclosure on Wednesday, the company said it secured board approval to buy back from creditors the dollar-denominated bonds, which are listed in Singapore. SMC also applied for a six-day suspension of trading of its shares.

“We believe the suspension of trading is essential to maintain a level playing field and to allow the investing public the opportunity to carefully analyze and consider the consequences, if any, of the invitation to tender on their investments in SMC shares,” the company said.

The buy-back of the 2-percent bonds is part of SMC’s efforts to “refinance its existing financial obligations… under terms favorable to the company.”

The bonds, which are exchangeable for common shares in SMC, are originally due 2014.

“The tender offer will commence in the morning of, and end in the evening of, Jan. 29, 2013,” SMC told the local bourse.

The $600 million in SMC bonds were issued in 2011 as the company was beefing up its “war chest” for acquisitions in various industries, including infrastructure, power generation, mining and telecommunications.

SMC also recently acquired a significant stake in flag carrier Philippine Airlines (PAL) from the group of taipan Lucio Tan.

The acquisitions outside the company’s former core business of food and beverages are part of efforts to boost the group’s sales to more than P1 trillion every year, taking advantage of the country’s improved economic performance and steady income from its new businesses.

“We expect San Miguel to post a strong double-digit compounded annual growth rate, driven primarily by the earnings contributions from our new businesses, mainly power and Petron,” SMC chairman Eduardo Cojuangco Jr. told shareholders last year.

SMC posted a net profit of P19.2 billion in the January-September 2012 period, up 61 percent from the same period a year earlier.