Petron raises $500M from sale of perpetual bonds

Petron Corp., the country’s largest oil refiner and distributor, has raised $500 million from the sale of perpetual bonds, thus reopening the international hybrid capital market for Philippine issuers.

Petron priced the hybrid capital notes at 7.5 percent a year after a “well-received” road show in Asia and the United Kingdom that resulted in an orderbook that was five times oversubscribed, said Wick Veloso, chief executive officer of HSBC Philippines, which is among the bookrunners and lead managers of this issue.

Perpetual capital securities are considered equity from the point of view of the issuer but these also have some features of a debt instrument.

“Petron will be able to account for this as equity because it is undated and because of the deferral option,” Veloso said.

The last Philippine corporate issuer that tapped the overseas hybrid capital market was port operator International Container Terminal Services Inc., which raised an initial $200 million in 2011 then reopened the issue last year to bring the total issue size to $350 million.

The latest issuance consists of US dollar-denominated undated subordinated capital securities, which are “callable” or can be redeemed after 5.5 years and every six months after. If not redeemed, Petron will have to pay a step-up rate, creating a “synthetic maturity” deemed as an investor-friendly feature.

“This transaction is notable for being only the second hybrid capital issuance from the Philippines,” Veloso said.

The three other banks that acted as joint bookrunners and lead managers are Deutsche Bank, Standard Chartered Bank and UBS.

“We congratulate Petron for this landmark deal that brings Petron a step closer in its Refinery Mastery Plan 2. Despite heavy supply in the market, Petron navigated it successfully and achieved outstanding results,” Veloso said.

Petron’s Refinery Master Plan seeks to enable the company to diversify into the petrochemical business and sustain its growth momentum.